Beef Prices Are Through The Roof And Trump Has No Idea What To Do

Last week, President Donald Trump signed a proclamation lifting tariffs on a portion of imported lean beef trimmings from unspecified countries — an attempt to lower sky-high ground beef prices ahead of the midterm elections this fall.

Trump’s order aims to bring in an additional 300,000 metric tons of trimmings duty-free over the course of three months starting Sept. 1, to help “meet current domestic demand at reasonable prices.” The administration has not disclosed where this meat would come from, though most experts agree a likely source would be Brazil.

Many U.S. processors combine foreign lean beef trimmings with fattier, higher-quality domestic meat to produce ground beef for the American market. A lot of those trimmings already come in without tariffs — Trump is just raising the quota so that more cheap meat comes in through November.

The president has claimed that raising the tariff-free quota would “substantially lower the price of ground beef,” which is now pushing nearly $7 per pound on average. But agricultural economists told HuffPost it’s unlikely that shoppers would notice an appreciable difference in beef prices at the grocery store due to Trump’s order.

Three hundred thousand metric tons might sound like a massive amount of beef, but it only represents around 3% of Americans’ overall annual beef consumption, said Vincent Smith, an economist at Montana State University. Even excluding steaks and other cuts, it amounts to less than 7% of the country’s annual ground beef supply.

“The real question is what sort of impact would that have on current prices paid by consumers for ground beef in their local grocery [store],” Smith said. “The answer would be some, but not necessarily very much.”

It would be a mistake to assume that Trump’s maneuver would increase the beef supply by as much as it sounds. The reality is that importers are already bringing in a lot of lean trimmings above the current quota and paying the 26.4% tariff rate because it’s still profitable for them to do so. Many of those 300,000 metric tons covered by the proclamation were probably destined for the U.S. market anyway — importers will just be able to bring them in at a lower price.

Smith said that any downward pressure on prices could be counteracted by other factors, too. Processors could end up using the cheaper, frozen imports more gradually than anticipated, blunting their impact on the market. And domestic ranchers might hold back on sending cattle off to slaughter if they anticipate lower prices, negating some of the increase in supply that might come from raising the foreign quota.

“I’ve never met a rancher who is anything but extremely astute about marketing their cattle,” Smith said. “We’ll see adjustments in the market on the supply side that will offset the effects of a short-term surge in imports.”

Trump claimed he had brokered a “commitment” that the imported beef in question would be “sold at 25 percent below current market prices,” though it’s not clear who the sellers are in that equation. No matter what, shoppers should not anticipate a 25% drop in the price of ground beef at their supermarket.

Beef goes through several hands before it reaches a customer’s plate, and there’s no guarantee that importers, distributors or retailers will share whatever savings they see. Since these companies can set their own prices, it’s highly unlikely that lower costs would be passed along “dollar for dollar,” as an analysis from Purdue University’s Center for Commercial Agriculture noted.

Besides, any additional tariff-free trimmings would only represent a portion of what a supplier was using in its ground beef, said Derrell Peel, an agricultural economist at Oklahoma State University.

“The companies that want it will buy it. Whether they will pass [the savings] along, there’s no way of knowing,” Peel said. “Everybody prices according to the market.”

Furthermore, Peel noted that most foreign lean beef trimmings end up with “institutional” buyers — chiefly restaurants — rather than retail grocery stores, which tend to source fresh domestic beef. So Trump’s maneuver would likely have more impact, if any, on the cost of a fast-food cheeseburger than a tray of ground beef from the grocery store.

McDonald’s or Burger King franchisees might decide to knock a few cents off a value meal if they get cheaper beef. They also might not. Either way, it’s less likely to register on consumers than a drop in the retail price of ground beef.

“What he’s trying to do is make hamburger cheaper before Election Day. I don’t think it’s going to work,” Peel said. “It won’t show up at the grocery store for the most part.”

Soaring beef prices have become a millstone for Trump and Republicans as they try to hang on to control of the House and Senate. Raising the tariff-free quota may have won Trump some headlines, but it doesn’t change the main reason prices are so high: Our domestic cattle herd has fallen to its smallest size in more than seven decades, in large part due to years of drought, yet our demand for beef remains extremely strong.

“We’re already importing record amounts of beef as it is,” said David Anderson, a livestock economist at Texas A&M. “We’re seeing exactly what we expect to see with record high prices: importing more and exporting less.”

Anderson called the timing of Trump’s tariff move “unfortunate.” He said fall is when a lot of older cows destined to become hamburger meat are culled from the herd and sold; prices for those animals tend to drop accordingly during the season. An influx of foreign beef at the same time could push down the prices ranchers would have gotten for their domestic cattle when they sold them for slaughter.

If raising the tariff-free quota achieves its stated goal, the lower prices could make it less attractive for ranchers to grow more cattle and rebuild the domestic herd over the long term, which is what needs to happen for prices to moderate in the supermarket meat case, Anderson said.

“High prices: that’s the market signal to grow our herds,” he said. “This discourages the incentive for U.S. ranchers to expand and encourages more imports.”