What Impact Will the Latest Tariffs Have On Our Food Supply?
In today’s Factual Friday, I want to touch upon something that has more or less been dominating the news cycle of late, and for good reason: tariffs.
Whether we like to admit it or not, tariffs will undoubtedly affect all of us in one way or another. This post is not meant to be political, but purely to examine how tariffs might impact an already historic situation in the meat industry.
For those of you who haven’t been following the news, President Trump announced a new series of tariffs last Wednesday, including a 10% tariff on all countries in addition to tariffs already put in place. He also announced that an individualized reciprocal higher tariff will go into effect for countries with which we have the largest trade deficits.
For the non-economists among us, a trade deficit means we are importing more than we export. Our current trade deficit is hovering right around $122.7 billion. This is down slightly from a record high of $131.4 billion in January (somewhat of an artificial peak since we saw a surge in imports as businesses anticipated upcoming tariffs, but still high, nonetheless).
We have been running consistent trade deficits since about 1976, relying heavily on imports of oil, consumer products, and, yes, food.
And that’s what I want to discuss.
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The State of Food Production in the United States
Despite being home to some of the most fertile agricultural land in the world, farming in the United States accounts for less than 1% of our GDP. Our agricultural imports in 2024 alone amounted to roughly $213 billion.
There are a few reasons why we’re so upside down on our food production, and the reasons are complicated. Let’s get the most obvious one out of the way first: compatibility. There are some foods that can’t be grown in much of the continental United States (bananas and pineapples being a good example).
But we import a lot of food that could easily be produced here. For instance, we import about 195.9 million pounds of broccoli from Mexico alone. We import roughly 305 million pounds of lamb, most of it from Australia and New Zealand.
One of the reasons why we import so much rather than produce it domestically is simply because it’s cheaper, which is one of the issues President Trump is hoping to resolve with the tariffs. Were the situation that black and white, I do think the tariffs would have the desired effect over time, but as always, the political and socioeconomic waters are quite muddy.
Why is it cheaper to buy foreign-sourced goods rather than those produced domestically? Lots of reasons. Some of it has to do with the strength of the American dollar in other nations, some of it has to do with reduced production costs abroad (often related to lower labor and regulatory standards in other countries, though not always), and some of it has to do simply with our expectations as Americans.
The Cost of Food
This is an incredibly unpopular opinion, but I don’t believe we spend enough money on food as Americans.
Now, before the mobs come after me with torches and pitchforks, let me explain.
Right now, on average, Americans spend roughly 11% of their household income on food. In the 1920s, Americans spent more than 20-25% of their household income on food, and in 1901, 43%.
I’m not blinded to the fact that there are a lot of confounding variables in this discussion, too, but in my view, the biggest problem facing us as Americans is not necessarily inflated food prices, but the fact that our entire cost of living is inflated. Much of our income is spent on things that simply did not exist or were viewed as luxuries in the 1920s, like smartphones and electronics, automobiles, and so on.
I’m not advocating for a return to life as it was in the 1920s, merely making the claim that perhaps it’s time to rethink how our food budgets are spent. Food is by far the most important purchase we have to make, yet we put the least thought into it.
It’s worth thinking more deeply about the value behind our food, both how we can invest in higher quality food and, perhaps more importantly, waste less of what we do buy. An estimated 30-40% of our food is wasted each year.
The Role of Subsidies
Another reason food prices have become so comparatively cheap is because much of our food production here in the United States is heavily subsidized, with the commodities being produced and exported back out.
Consumer tax dollars keep corn and soy prices low, with much of that being exported out for the overseas production of ethanol, animal feed, and processed food. For the most part, subsidies at that scale don’t exist for most of our “table-ready” food crops, like fruits and vegetables.
When we talk about food that is grown in the United States and then either kept here or exported, a very large percentage of it is not something you would necessarily go and buy at the grocery store “raw.” It requires additional processing, whether in the form of being fed to animals as livestock feed or being turned into some kind of processed food (like high fructose corn syrup). In 2023, more than half of our exports were in the form of grains and livestock feeds and oilseeds.
Reinvigorating Our Supply Chains
We simply are not getting the best “bang” for our food production “buck” on the land we have, and every slight shift in environmental or political conditions is proving just how thin of a line we’re walking.
The COVID-19 pandemic was an excellent example of this. Do you remember how food security was a major issue for so many in our communities, yet the news was flooded with images of farmers having to euthanize hogs and destroy their crops? It’s a prime example of how globally reliant our food system truly is.
It is my personal belief that tariffs could prove to be beneficial in leveling out the playing field here and bringing more food production local…but only if we pivot rapidly, and this is what concerns me.
So much of our agricultural exports are not “table-ready” products, and given the high cost of producing many of these at scale, I don’t think the market will rebound quickly enough to pick up the slack. I just don’t think we have the ability to pivot, and it has nothing to do with people “wanting to work” or anything of the like. It simply requires time for significant, meaningful changes to be made.
Beef and Tariffs
Our beef industry is already taxed, with the national cattle inventory at the lowest it’s been since 1951. It’s great news right now for cow-calf operations, who are fetching premium prices for freshly dropped calves, but it’s going to spell some not-so-great news for the consumer as the costs of growing out those animals and getting them to the market are going to be higher and then passed on to the consumer.
The tariffs are compounding this, as much of our beef is imported (despite somewhat doctored figures that suggest otherwise). I’ve written on this before, but much of the beef that comes into the US is marketed as American beef because it may have been raised here for a brief period of time or reinspected upon arrival to the US and stamped as American.
For the most part, country of origin must be listed somewhere, but this isn’t something consumers always know how to find (nor is it always easy to find). And imported beef is almost always less expensive, making it the go-to buy.
In 2022, we imported nearly 100 million pounds of beef from Brazil alone, much of it from large supplier JBS. The three other largest suppliers of beef in the US are Tyson Foods, Cargill, and National Beef. All of these are multinational companies. Much of the beef we do produce here in the United States is exported, with top destinations including Japan, South Korea, China, Mexico, and Canada.
Translation = we eat just as much beef as we ever have before, and the supply of beef is low.
What Will Happen Next?
Prices of beef will likely rise, and coupled with the retaliatory tariffs these countries are going to impose on us for the goods we ship out, the prices American farmers get for their products may begin to stagnate until we can up production and find new markets in the US (which takes time and resources; our supply systems won’t shift overnight).
These effects will likely be hardest felt when it comes to meat and poultry. While it’s easy to ramp up production of some types of crops (you can grow a crop of spinach in just a few weeks), livestock require a lot more time and resources. From pregnancy to slaughter, it takes several years to get beef cattle ready for market.
It is going to take time to rebuild our national beef inventory, especially considering that this decline is something that has been in the works for several years.
So while the tariffs may indeed have the ultimate positive effect of bolstering domestic food production, I don’t think we are going to be able to respond in time for them to be of any benefit. Many economists are pointing now to the likelihood of a recession and the cost of goods is poised to increase dramatically.
The Takeaway
I don’t write all this to fear monger or point political fingers. I’m not a politician or an economist and there’s no telling how things will shake out. I merely write this because my hope is that these issues call to mind some larger, more systemic issues with the way we think about our food.
Hopefully, we view the latest drama in our news cycle as a call to action to keep things as local as possible, to support our local community members, and to keep our fellow Americans in mind as we weather what’s proving to be quite a firestorm.
Food is the number one thing we need to stay alive, yet it’s the number one thing we want to cut costs on. And I get it. You have to eat, and you shouldn’t have to pay a fortune to do so. But the next time you grocery shop, think very carefully about where that food is coming from.
We are very willing to spend $1000 on the latest iPhone, but balk at the idea of spending $1000 on a share of pork that will feed us nutritiously for an entire year. Our understanding of the value of things is somewhat warped these days.
Our supply chain is fragile, and it’s important to think about its vulnerabilities. Only then can we move toward a future for America that is a positive one.
