Eating losses: A worker at Stone Sal restaurant in Shanghai checks US beef. Some restaurateurs are absorbing losses instead of raising menu prices. Picture: AFP
Eating losses: A worker at Stone Sal restaurant in Shanghai checks US beef. Some restaurateurs are absorbing losses instead of raising menu prices. Picture: AFP

Shanghai — A key objective of US President Donald Trump’s trade war is to pressure Beijing to "buy American", but China may simply take its business elsewhere when it comes to millions of dollars in US meat imports.

Beijing’s retaliatory tariffs on US pork and beef are making them prohibitively expensive and Chinese importers are turning to other sources, a trend that is being expected in other sectors as well.

"When the US prices go so expensive after the duties … we will source from other origins," said Zhang Lihui, Shanghai manager for global meat company PMI Foods.

Australian beef

"Like for beef, we will buy more from Australia, we will buy more from South America, and maybe a little bit more from Canada," Zhang said.

PMI Foods had already ceased importing cuts of US pork meat into China after Beijing’s tariffs — imposed in July in response to Trump’s initial duties on Chinese goods — had driven prices up.

Shifting trade patterns caused by the tariff battle would "definitely" benefit other countries at the US’s expense, Zhang said. "The Chinese market will certainly look for replacements," she said.

The outcome of the trade battle, spread across a range of sectors, remains hard to predict. But analysts warn that US exporters will lose significant China business.

The US exported about $140m in pork, beef and related by-products — about 10% of all US beef and pork exports — to China in June, before the tariffs kicked in, according to the US Meat Export Federation.

China is clearly targeting imports of commodities such as meat, soybeans, wheat and petrochemicals that are easily replaced in the global market, Julian Evans-Pritchard, a China economist with Capital Economics, said.

Global trade system

"That’s the idea of tariffs: you are trying to hurt the other side while not hurting yourself too much," he said.

"I think [the trade war] could lead to some quite significant shifts in the flow — which country [is] getting what from where," Evans-Pritchard said.

The effect on prices of imports, however, will be largely negligible as "the global trade system is quite flexible", he added, and because suppliers on both sides will absorb much of the tariff costs themselves to maintain their exports.

That is the case with Lin Zhengu, chef and owner of Shanghai’s upscale Stone Sal steak restaurant, which serves mainly high-end US and Australian beef. Costs of prime US beef cuts are up 30%-40% due to the trade war, Lin said, but he and his US suppliers are eating the losses rather than passing them on to customers.

"The only way we will switch to other [non-US] beef is if the gate is totally closed. For now, we still want to work with our suppliers and farms," he said.

Trade experts say some of the most valuable US exports to China such as Boeing aircraft and US-made cars are threatened as China can instead import Airbus jets or cars from Europe and Japan.

Even US soybeans, seen as a key US leverage point due to the enormous quantities that China imports, are not irreplaceable.

The head of Chinese state grain trading giant Cofco said it was looking at increasing imports of soybeans from Brazil, and of other grains from places such as Ukraine and Russia.

Shanghai Xinshangshi International Trade, a major formerly state-owned Chinese food importer, brought in $40m worth of US beef and pork in 2017 and had planned to raise that to $100m in 2018.

But due to the trade war, its GM, Xu Wei, is turning to Europe, Australia and South America instead.

"The gap will be filled very soon," Xu said.

"So for the trade war, if we Chinese importers still want to maintain our trade volumes, it would hurt the US suppliers and exporters the most."

AFP


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