Play the long game: Agriculture’s lessons for business in dealing with Trump’s tariffs
Throughout the history of food trade, tariffs have followed. That’s why its worth listening to the cooler heads at the farm gate.
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In are world where markets have been put on edge by Donald Trump’s trade war, agribusiness has a message for business. Take a breath, wait and don’t overreact.
The US President appears hellbent on up-ending the global economy with no exemptions to his tariff regime. In Canada and Europe retaliation is under way. There are calls for Australia to follow on steel tariffs.
Agribusiness, which has been hit with tariffs one way or another for its entire modern history, recommends playing the long game.
Some of Trump’s proposals even look mild historically. The US slapped brutal tariffs averaging 40 per cent on agricultural imports during the 1930s.
It was only a few years later the US backtracked when it realised it was crippling its own economy. Australia had its own protectionist instincts, imposing tariffs of more than 70 per cent on some products, and only really starting to cut them following World War II.
From Europe, China or anywhere around the world where food being traded, tariffs have usually followed. Then with the right overtures, tariffs have just as quickly disappeared.
The farming world could be in line for a new round of tariffs, with Trump recently warning agricultural imports would represent the next wave of his blitz from April 2.
But The Australian and Visy’s Global Food Forum held in Melbourne heard Australian producers were preparing to adapt. They urged a cooler approach, saying reciprocal tariffs only added another layer of distortion on a distortion.
GrainCorp chief Robert Spurway is among those with plenty of tariff scar tissue: Tariffs have been lurking around his grain export industry for decades. His most recent battle came when China slapped an 80.5 per cent tariff on Australian barley at the height of the Covid pandemic. Back then, tariffs were being wielded as a political instrument over an economic instrument. At the time, China was taking aim at Canberra after the then Morrison government called for a global investigation into the source of the Covid virus.
“We’re a sector that’s been very good at navigating our way around those (tariffs), finding market diversification,” Spurway told the forum. “The real risk to tariffs is it lifts the cost for consumers. That’s inflation and that’s not good for anyone.”
Beef is expected to be in the firing line of future US tariffs. And this shows the absurdity of the White House’s tariff policy. The US is already facing a shortfall in beef production, with the cattle herd there at the lowest level in decades. Something like that takes years to build up. Even then, it is doubtful a market like the US can be self-sustaining. Much of Australia’s $3.4bn sales of beef ends up in McDonald’s burgers.
Australian Agriculture Co’s chief executive Dave Harris says agriculture has long operated in cycles. And that includes being prepared to ride out the ups and downs. Tariff policies almost always inevitably shift.
Some of Harris’s cattle take as much as four or five years moving through the supply chain from paddock to the market.
“I just can’t turn the tap off over a six-month time frame. So we just have to be nimble and be prepared to move around,” he tells the Global Food Forum.
Australian producers got a tough lesson in tariffs when China was pushing ahead with its targeted but steep tariffs on Australian wine, barley, beef and lobsters. Yet there was a silver lining out of that: a crash course in diversification. Australia had gone all in on China, and that strengthened the hand of the buyer. Canada is learning that brutal lesson – more than 60 per cent of its entire agriculture exports go to the US.
Food does have an advantage over cars, steel, electronics or finished products in that it is a staple, and it has to go somewhere.
As SunRice’s Paul Serra told the Global Food Forum: “The only reason that other countries buy our product is because they need it or because it’s more cost-effective. Food is incredibly resilient. The world’s population needs to eat.”
However, moving food and soft commodities around the world involves one of the most complex supply chains. This was seen during the early stage of Russia’s invasion of Ukraine, which sent the cost of wheat and seed oils soaring. Those price hikes were even felt here. The looming disruption from Trump’s trade war is only going to add to the cost of food for those who can least afford it.
Whether it’s global or domestic, no one gives a second thought about a supply chain until it stops working.
Eggs in short supply, last week’s cyclone conditions across southeast Queensland and the crippling round of strikes at supermarket major Woolworths in the lead-up to Christmas – all had a real impact on supermarket shelves. Coles chief executive Leah Weckert describes her supply chain across 850 stores as “probably one of the most complex logistic exercises that happens every day in Australia”.
“Every day we have on the road, transporting a pretty wide range of products, from ambient through to frozen food, then you’ve got … home products like meat and fresh produce as well. And then you put all that together, that means everywhere we’re travelling, over 2 million kilometres getting products in store.”
Her comments come ahead of the imminent release of the ACCC’s inquiry into supermarkets. Treasurer Jim Chalmers was handed the final report late last month. This could be released as early as next week. As in global trade, the Coles boss points out government intervention or suggestions of breaking up supermarkets only disrupts this finely-tuned machine, which has only one outcome: pushing up prices.
Originally published as Play the long game: Agriculture’s lessons for business in dealing with Trump’s tariffs
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