Following the political dominoes of international trade policy can be mind-boggling, but the basic economic principles can be simple. A tariff placed on U.S. products by another country (like meat, cheese, and soy beans) will reduce the amount (supply) of U.S. meat, cheese, and soy beans sold in other countries, and increase the amount of meat, cheese, and soy beans available for the U.S. market. In the U.S. market, this represents an increase in supply which will increase the amount meat, cheese, and soy sold in the U.S. and decrease the price of each good.
How big can this effect be?
Here are soybean futures prices in the U.S. for the last three months (from NASDAQ):
And here's a VOX story about the current supply glut of meat and cheese in the U.S. (only partially caused by tariffs, and partially caused by other interesting agricultural policies), which will eventually cause meat and cheese prices to fall in the U.S.
There’s a lot of uncertainty these days. So here’s a comforting thought: The United States of America will not run out of cheese or meat anytime soon.
US dairy producers now have a 1.39 billion-pound surplus of cheese, according to data from the US Department of Agriculture. As the Washington Post has noted, that’s the largest domestic reserve of cheddar, Swiss, American, and other cheese varieties on record.
It means there’s enough excess cheese to arm each American citizen with a hefty 4.6 pounds of the crumbly, melty, salty good stuff. Why is this happening? Simply put: US dairy producers have been overproducing milk. Thanks to selective breeding, American cows are more productive than ever. And when demand for milk and dairy goes down in the summer, dairy producers store their excess milk as cheese, which has a longer shelf life in cold storage.
A similar glut exists for the meat industry. According to new data from the USDA, American meat producers now have 2.5 billion pounds of chicken, turkey, pork, and beef in cold storage, which is also a record, according to the Wall Street Journal. And producers are running out of warehouse space to store it all.
The meat stockpile is in part, the Journal reports, because of newly implemented Chinese and Mexican tariffs on American pork. These were set in retaliation for tariffs the Trump administration placed on Mexican and Chinese steel, among other goods. With slowing exports — and increased beef and poultry production partially due to falling prices of grain — American meat producers have more product in the freezer. Though that might be good news for American consumers, as meat prices are likely to drop a bit at the grocery store. (As Vox’s Tara Golshan reports, the escalating trade conflicts will likely impact the dairy industry as well.)
The upshot: The increase in domestic supply caused by increased tariffs on U.S. products sold oversees will benefit U.S. consumers (through lower prices) and harm U.S. producers (through lower prices).