The Wall Street Journal reported that the White House was planning to temporarily reduce tariffs on beef imports to bring down prices for consumers. That’s funny, because this administration claims that higher tariffs do not increase prices. Yet, somehow, lower tariffs can reduce prices? One of these statements must be false, or political convenience is bending the laws of mathematics.
Anyway, the plan to suspend beef tariffs was itself suspended after cattle ranchers voiced their displeasure at the prospect of additional competition. They were right to be alarmed. High tariffs on beef, which long predate the Trump administration, are working as intended. The duties are meant to keep the price of beef higher than it otherwise would be, “protecting” ranchers’ incomes at the expense of everyone who eats red meat.
The federal government controls the volume of beef imports through what’s called a tariff-rate quota. Foreign countries are allotted a certain amount of beef that they may sell to Americans each year at very low tariff rates. Above these quotas, imported beef is taxed at 26.4 percent. When domestic cattle is plentiful, and prices are relatively low, the high tariff rate functions as a virtual moratorium on imports above the quota.
The system’s design is to limit the supply of beef available to consumers so that they pay higher prices to domestic producers. Higher prices usually reduce demand, but Americans love little more than steaks and hamburgers, so beef consumption is setting records even as domestic cattle herds have shrunk and prices have skyrocketed. Beef is one of the most persistent contributors to inflation, with ground beef prices up 40 percent from five years ago.
Just because Americans keep eating beef doesn’t mean they aren’t upset about prices, though. In fact, their stubbornly strong consumption has prevented prices from easing. To meet demand, foreign producers have begun exceeding their import quotas, paying the exorbitant duty and passing it on to hungry consumers. Even when the beef tariff fails to keep imports out, it still makes them more expensive, so domestic ranchers don’t have to cut their prices to compete.
Cattle ranchers know that if tariffs are reduced, more imported beef will come to America at lower prices. That would stop them from putting the “premium” in premium cuts by charging as much as they have been able to in a captive market with tightened supplies. Of course they opposed Trump’s plan to relieve buyers.
Republicans know they need to focus on affordability to salvage their midterm chances, but they are rediscovering that every price is someone else’s income. Once the government gets enmeshed in favoring producers over consumers, it’s very difficult to level the playing field again.