Independent analyst from Global AgriTrends Simon Quilty outlines the case against possible US tariffs on imported lamb and explores the potential consequences for Australian sheep producers.
Last month, the American Sheep Industry Association (ASI) officially asked the United States Trade Representative (USTR) to investigate the impact of lamb imports on US producers. As a result, the USTR recommended an ITC (US International Trade Commission) investigation.
The purpose of this investigation is to determine if lamb imports were a substantial cause of serious injury to the US domestic lamb market.
This investigation will last 120 days, and the ITC will collect testimony and data from all interested parties, including Australia, on whether injury was caused to the market.
The ASI is particularly focused on the impact of lamb imports in 2024, claiming that imported lamb traded 108 per cent below domestic lamb and, at some periods of the year, was at a 19.5 per cent discount.
Ironically, US domestic lamb prices are at record levels, with lamb prices at the equivalent of $19 AUD/kg CW compared to Australian domestic lambs at $11.50 AUD/kg CW, effectively trading at 65 per cent premium to Australian lamb values today.
If the US domestic market was truly damaged, there would not be record prices today.
It is important to note that the year in question, 2024, saw US lamb prices rise 12.5 per cent during the 12-month period. So it would be argued that if Australian (or New Zealand) lamb was in any way harmful, US lamb would have fallen in value, not risen.
Another important factor the ASI has failed to understand is that sheep numbers globally continue to fall, so any decline in America’s sheep flock is part of a global trend. This is seen in Australia, New Zealand, Uruguay, and Argentina, with the fundamental problem being the high cost of labour and the wool industry's poor performance over many years. Competing land use continues to drive this shift away from sheep, with cropping tending to be the most likely commodity to replace sheep.
The ITC investigation was initiated in mid-July, and its findings won't be made known until mid-November, post the US mid-term elections in early November. Given the Trump Administration's appetite for introducing tariffs, as seen in recent days with Canada, the likelihood of a 30 per cent tariff on imported lamb cannot be ruled out.
If this tariff is introduced, I expect the majority of the cost will initially be borne by the US consumer, as it is passed through in a tight lamb supply market.
Tight lamb supplies are expected throughout 2026 and 2027, but as lamb numbers start to build and volumes increase, the cost of the 30 per cent tariff will eventually be passed back to producers in Australia and New Zealand in 2028 and thereafter.
In short, tight supply markets will see costs passed forward to consumers, and larger supply markets will see the cost passed back to farmers. So, a stay of execution for two years should the ITC's findings go against Australian farmers, but eventually it will be borne by farmers in Australia as numbers grow.
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