Independent livestock analyst Simon Quilty of Global Agri Trends shares his thoughts on how US tariffs could affect the Australian beef and sheepmeat sectors.
The expression ‘threading the needle’ is an idiom that refers to performing a complex task that requires skill, precision, and accuracy. This sums up Australia’s challenge of minimising tariffs with the Trump Administration in coming weeks, as negotiations get underway.
As part of this negotiation, Australia is likely to reopen its domestic market to US beef, which was prevented from coming to Australia 20 years ago due to a case of BSE (Bovine spongiform encephalopathy) in the US. Since then, the World Organisation for Animal Health (WOAH) has redefined the requirements of countries that are not required to notify WOAH on atypical cases of BSE.
Global markets are currently focused on the Trump Administration's upcoming introduction of global tariffs, which has a looming deadline of 2 April.
Last week, the Trump Administration announced a 25 per cent (pc) tariff on Australia’s steel and aluminium imports but did not outline other agricultural and non-ag products.
No country seems safe given the parameters that define 'reciprocal tariffs’, which the White House seeks to impose on import countries.
The weekend prior, the White House Trade Adviser, Peter Navarro, announced that a single rate per country would be applied on 2 April, regardless of the product, agricultural or non-agricultural. He said, "the concept here is one number that reflects, in the aggregate, the unfairness embedded in the higher tariffs and non-tariff barriers that countries impose on us."
The White House's announcement of 25 pc tariffs on Australia’s aluminium and steel, but nothing on agriculture, points to potentially several tariffs on different sectors, a slight deviation from Navarro’s comments last week.
So, when identifying the US parameters for ‘reciprocal tariffs,’ one key parameter is each country's current standing on whether they are in a trade surplus or deficit with the US. The second parameter, it seems, is current import tariffs, and the third is whether that country imposes a VAT (value-added tax or GST, Goods and Services Tax on imports) on imports.
Each of these factors seems to be given a particular weighting, and then the US will impose a final single tariff reflecting these factors' collective impact (or two tariffs, given that one has already been imposed).
Assessing Australia's standing on these three factors hopefully bodes well for us.
Firstly, the US has a trade surplus with Australia of USD 17.5 billion (2024), not a deficit, unlike 105 countries that do.
| Ranking | Destination | Jan to Nov 2024 (USD) |
|---|---|---|
| 1 | China | -$270 Billion |
| 2 | Mexico | -$157 Billion |
| 3 | Vietnam | -$113 Billion |
| 4 | Ireland | -$80 Billion |
| 5 | Germany | -$76 Billion |
| 6 | Taiwan | -$76 Billion |
| 7 | Japan | -$62 Billion |
| 8 | South Korea | -$60 Billion |
| 9 | Canada | -$55 Billion |
| 48 | New Zealand | -$1 Billion |
| 227 | Brazil | $6.8 Billion |
| 230 | Australia | $17.5 Billion |
This table shows Australia’s trade surplus with the US, in comparison to other countries. Source: US Census.
Secondly, our import tariffs on US products are 3 pc for US agriculture imports and 2 pc for non-agriculture imports, both at parity and below US import duties.
The chart opposite shows the average import tariffs for different countries. Source: World Trade Organisation.
Lastly, Australia has no GST or VAT on imported food, so hopefully, this is not seen as a trade restriction in the eyes of the US. However, US imports of non-food goods do incur 10 pc GST. It should be noted that 175 out of 195 countries as members of the UN employ VATs to collect tax. Here is a list of major beef exporters’ VATs (Source: Global VAT Compliance)
- Brazil: 17 pc
- Argentina: 21 pc
- Uruguay: 22 pc
- New Zealand: 15 pc (includes food)
- Canada: 5 pc
- Mexico: 16 pc
- Australia: 10 pc (food excluded = 0 pc)
As we weigh up the pros and cons of Australia's situation, any impediments to trade for the US into Australia are minimal. The only concern is non-agriculture items, which are at a trade surplus with minimal import tariffs imposed on them.
In 2024, the US was Australia’s largest lamb and beef market, taking 85,132 MT (24 pc market share) and 394,543 MT (29 pc market share) respectively.
With global protein tightness expected in 2025, mainly on beef, any restriction on US exports creates opportunities outside the US into some of their key export markets, namely Japan, Korea and China.
Last week, President Trump published a social media post that read, “To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2nd. Have fun!"
President Trump believes more US beef will likely remain in America (and I agree with him), intensifying Australia’s role in backfilling global US exports in many markets.
So, on paper, Australia’s tariff criteria parameters look better than most export countries, but neither I nor any agricultural export sector participants have confidence in the outcome in the coming weeks; let’s hope we can ‘thread the needle’.
Lamb exports remain robust in a world of uncertainty
Unlike beef, Australia’s lamb exports compete against New Zealand exporters and US domestic producers in the US. No US lamb is exported to other markets. The US sheep flock is 5 million head, and Australia’s flock size in 2025 is closer to 73 million head (according to recent estimates from MLA).
The US is our largest lamb market; therefore, the issue of tariffs remains essential in terms of its potential impact on pricing in coming years. Lamb supply also impacts pricing, so it is important to discuss both to understand how prices may look going forward.
This chart shows Australian lamb exports globally, for the 2023 calendar year and the 2024 calendar year.
This most recent MLA estimate of Australia’s flock size shows a six-million head decline compared to 2024, which indicates a heavy year of liquidation has just passed. I agree with the sentiment, but we differ on the starting point. The flock size is much lower, closer to 65 million head. The ABS has not officially measured it in the last three years, so it’s a moot point.
The MLA estimated a flock size fall of 7.4 pc, which is the most crucial number and signals tightening moving forward. Given the heavy record kills of mutton and lamb, I think the flock has fallen even further, possibly by 9 to 10 pc, as many wool producers exit the industry.
In the past, large falls in flock size were accompanied by a significant fall in lamb kills, which saw kill numbers fall 5 to 9 pc in those years. MLA’s estimate of a 0.5 pc fall in lamb kill, I believe, is too small.
However, given last year's record Australian mutton kill, I believe that declines in lambs could be closer to 10 to 12 pc with a smaller breeding flock. This would give an estimated kill of 23 million head in 2025, compared to the previous year of 26.4 million head.
Stronger demand globally, plus the expected tightness in lamb and mutton supply, points to significantly higher prices this year and next.
The chart opposite shows global one prices from 2010 to 2025. Source: Food and Agriculture Organisation (FAO).
The 45 pc expansion of the Middle East market over the last two years and the 25 pc expansion of North America provide a strong backdrop for better prices.
So, what do US tariffs do to forecasts of higher lamb prices?
The answer depends on several factors. Firstly, a high tariff rate will directly impact lamb returns in Australia, and a low tariff rate will be less so. Second, the volume of Australian lamb supply matters; the lower the volume, the higher the prices will be, and vice versa. Third, demand. How much is the US consumer willing to pay?
So, under the rules of engagement, one individual tariff rate will be set for Australia for non-agricultural and agricultural goods. This will occur for all export countries into the US.
If this new tariff rate is low and should there be a tight supply of lambs from Australia, and US consumer demand will remain strong. I expect prices to reflect my forecasts.
The chart opposite shows a trade lamb price forecast through to the end of 2026. Source: Global Agri Trends.
There is also a chance that tariffs may be higher than expected, supply more plentiful, and consumer demand falls as talk of a US recession increases. In this scenario, prices could struggle to be maintained in the US.
Therefore, demand from other markets is key, and the ability of Australian exporters to diversify will be critical.
With global animal protein supplies tight, I think strong demand in other markets will soften the worst-case scenario I have outlined.
Even with tariffs, I believe strong, robust global demand is likely to remain even in a world of uncertainty.
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.
