Tariffs: Good or Bad?
Tariffs are not only a polarizing topic, but they are extremely complex.
In early April, a 10 percent tariff was imposed on lamb imports from Australia and New Zealand. In 2024, imports reached a record high, accounting for 73 percent of total lamb (and mutton) consumption in the US, with 74 percent coming from Australia and 25 percent from New Zealand.
A 10 percent tariff was also imposed on goat meat. While I couldn’t find an exact figure, imports usually account for more than 50 percent of US goat consumption. Again, Australia is the major supplier, with most sourced from wild or feral goats.
Higher production costs (and other factors) make the US an attractive market for exporters. Without imports, the US would not be able to maintain its current level of consumption of lamb (1.3 lbs. per capita) or goat (~0.35 lbs.).
A tariff is essentially a “tax.” It is paid by the importer. The importer typically passes the added cost onto the consumer, making products more expensive to purchase. Higher costs usually impact consumers’ purchasing behavior, such as buying less lamb and goat.
Tariff money goes into the general treasury, with no strings attached. It could be appropriated for school lunches or used to pay for tax cuts for the wealthy. Monies could also be used bolster the domestic industry, as has been the case with the Wool Trust Fund, which funds development of the US wool market.
The claim is that tariffs result in higher prices for American producers. We all want higher prices for our sheep and goats, don’t we? At the same time, higher prices for producers mean even higher prices for consumers. Lamb and goat are already higher cost than other protein
sources.
Will the higher prices resulting from the tariffs cause consumers to substitute beef, pork or poultry (or another protein source) for lamb and goat? Maybe. The demand for lamb and goats is often inelastic, meaning consumers will continue to purchase it regardless of (modest) prices increases. Let’s hope this is true.
A 10 percent tariff is not enough to make imported lamb and goat more expensive than US product. It will help close the gap. But will a 10 percent tariff cause consumers to select American lamb and goat over imported product? We certainly hope so.
The wool market is even more complex, as wool is truly an international commodity. With reduced milling capacity, US wool is often sent to other countries for scouring and/or processing. Fabric may be sent to a third country for manufacturing. If the finished product (e.g., a suit) is made from American wool, but processed and manufactured in another country, it will be subject to the 10 percent tariff, making it more expensive for US consumers to buy.
And let's not forget that other countries may impose retaliatory tariffs, making it more expensive to purchase US products. About 15 percent of the US wool clip is exported, mostly to China. In 2023, only about 2.2 percent of US lamb production was exported. Little goat is exported (only 0.23 percent of US production).
The exchange rate of the dollar, relative to foreign currencies, also comes into play and cannot be separated from a discussion about tariffs. When the dollar is strong, we import more, because we get more value for our dollar. In fact, exchange rates can offset tariffs. The dollar is currently strong. We like a strong dollar when we travel to other countries, but it’s one of the reasons we import so much stuff.
If you direct market, tariffs might not have much of an impact (if any) on your price(s), but most producers put animals into commodity markets at one time or another. It is hard to know if the current tariffs affected spring market prices, since they coincided with important holidays (that drive up demand), but perhaps they will result in higher prices through the summer (when prices typically drop and many of us market our livestock).
While US sheep and goat producers mostly welcomed the 10 percent tariff, the industry is advocating for Trade-Rate Quotas. Trade-Rate Quotas. would establish a quota for imported lamb and goat, with a lower tariff rate applied within that quota and a higher tariff rate for imports exceeding the quota. It is believed this policy would incentivize domestic production and help our US industry recapture a larger share of the market.
Ultimately, the goal of tariffs is to increase prices to American producers, so that they grow production and invest in their industry. However, without a corresponding increase in demand, an increase in production would eventually lead to lower prices. Supply and demand! Economics 101. Lack of infrastructure can also prevent industries from growing.
Tariffs are nothing new. They are neither good nor bad. What’s important is to understand the potential impact they may have and to make decisions accordingly.
Written 05.14.25 by Susan Schoenian