COMMENTARY: Tariffs won’t boost producer prospects

The beef industry would shrink significantly if trade – imports and exports – were to be limited, and that’s because trade is beneficial for the business.

By Nevil Speer

Chalk it up to luck. My previous column on beef imports coincided with the Trump Administration’s announcement that it was proceeding with tariffs on goods sourced from Canada and Mexico. Shortly thereafter, I ran across this press release* in my X feed: “Ranch Group Supports New Tariffs; Wants More.”The statement explains that “foreign countries have an inherent pricing advantage over domestic producers due to lower wage rates, lower production standards, relaxed environmental standards and weaker currencies; … those factors enable global importers to leverage down domestic producer prices, which results in the dismantling of domestic food supply chains and displacement of domestic production with cheaper imports” [emphases mine].Displacement. Let’s start with “displacement of domestic production.” That argument was the primary focus of my previous column. Most notably, it explained that imports do NOT displace domestic production. Rather, the long-run data clearly reveals that “the ebb-and-flow of imports is highly predictable and subsequently predicated on relatively availability of lean trimmings sourced from cow/bull slaughter.”Dismantling. Now, let’s turn to the assertion that international trade is somehow undoing domestic capabilities. It’s somewhat ironic given that 2024 fed beef production (approximately 22.6 billion lb.) was the third highest on record – trailing only 2021 and ’22 (see “Demand the difference maker”).Nevertheless, the press release argues that “the zero tariff regime [a reference to NAFTA] over the past few decades has forced hundreds of thousands of domestic cattle and sheep** operations out of business.” Thus, we’re left to believe that free trade has proven to be a negative influence on producers over time.Productivity. But before we dig into the beef industry, specifically, all of this requires some broader context. Namely, consolidation is neither unique to the beef industry nor new to agriculture. The U.S. Department of Agriculture details it back to 1935 and further notes that “the number of U.S. farms fell sharply until the early 1970s. … Since 1982, the number of U.S. farms has continued to decline, but much more slowly.”Much of that consolidation is the result an enduring push for greater productivity (see “Doing more with less”). It happens in every industry. Business (re)engineer Michael Hammer explains the tension best: “Increasing productivity does enable a company [or an industry] to lower its costs while increasing its output, and that ought to be good for any business. But what is good for any business, it turns out, isn't good for every business.”Track record. With that, let’s turn to the data. The chart below highlights the beef industry’s cumulative trade balance (value of exports less value of imports) since 1990 (i.e., pre-NAFTA).

A couple of things are important:

NAFTA was beneficial for the beef industry – namely, beef’s trade balance continued to expand following implementation of the trade agreement (Jan 1, 1994).

The trade balance trend reversed direction following bovine spongiform encephalopathy and bottomed in 2007.

The data doesn’t support such claim that trade is to blame for the reduction in beef cow numbers during the past 15 years. While the business liquidated about 4.5 million cows, the trade balance remained persistently positive.

Tariffs are bad medicine. Given all that, there’s simply no foundation for claiming tariffs would be good for the beef industry. In fact, the opposite is true. Several years ago, Drs. Glynn Tonsor and Derrell Peel co-authored a white paper detailing the Economic Impact that Would Follow Loss of Beef Exports and Imports. It’s an excellent resource and one I’ve highlighted in previous columns.Most notably, it details the risk of limiting trade (both imports and exports); the industry would shrink significantly if that were to occur.That’s because trade is beneficial for the business. Accordingly, tariffs are bad medicine, and despite claims to the contrary, they won’t boost producer prospects.*The press release includes a link to a YouTube video that further asserts that “over 87,000 farmer feeders” have been “eliminated” since 1994. Based on USDA data, the majority of that loss occurred between 2012 and 2013. That’s because, beginning in 2013, USDA’s feedlot count no longer included operations with less than 10 head. The change was made to align with the Census of Agriculture methodology. That is, it’s a statistical artifact; the majority didn’t get “eliminated”; they just (intentionally) didn’t get counted.**For more on the sheep industry see “Sheep, tariffs and chess.”