Independent livestock analyst Simon Quilty of Global Agri Trends shares his thoughts on how US tariffs could affect the Australian beef sector.
The recent talk of President-elect Donald Trump introducing tariffs on all imports, potentially 10 per cent (pc) - with Canada and Mexico tariffs as high as 25 pc - raises the question of how this is likely to impact Australia's beef sector.
There are three reasons why Donald Trump may want to introduce tariffs:
- To slow flows of goods into America, spurring domestic manufacturing and competitiveness against foreign goods
- To raise government revenue from tariff collection
- Provide a strong negotiation position, possibly a pre-tariff negotiation.
This strategy is problematic because it is inflationary for US domestic beef pricing and may result in retaliation from other impacted countries.
Australian beef in a unique position
Given our strong competitive ties with US beef in Japan, Korea, and the chilled grain-fed market of China, the impact on US domestic pricing will impact global markets significantly.
Should US tariffs on beef be in place for all beef imports, this will lift the value of US domestic beef.
Graph showing Australia and US beef exports to key markets from January to September 2024. Source: DAFF and USDA.
In turn customers from international markets that US beef goes to, will need to bid higher for US beef, due to the higher US domestic price.
As a result, Australian beef exports to those same markets can be offered at higher prices given the higher price of US beef. This is particularly the case in Japan and Korea, where Australia and the US make up 81 pc and 89 pc of all beef imports, respectively. Any tightness of US supply and higher prices will dramatically impact Australian prices and demand in Japan and Korea.
Once again, Australia and the US dominate the grain-fed chilled and frozen market in China. Tightening US supplies and higher US prices will strengthen Australian demand moving forward in China.
Any retaliatory tariffs from any of these key export destinations toward the US will increase the demand for Australian beef even further.
The US market has become Australia’s number one beef market. As long as the tariffs are the same for all competing countries, such as Brazil, New Zealand, and other South American countries, I cannot see any downside for Australia. No one country has an advantage over another in the US—in other words, we need to compete on an even playing field.
In conclusion, Australia's real win will be the rise in US domestic prices, which will make US beef exports less competitive against Australian beef in key global markets.
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.
