Donald Trump and Swine Fever Are Creating an Economic Crisis

As trade tensions between the Trump administration and Chinese President Xi Jinping’s negotiating team escalate, with U.S. President Donald Trump threatening to impose drastic new tariffs starting on Friday, the negative fallout for farmers—from soybean growers in Iowa to hog farmers in Shandong—is potentially very high. But it’s all made worse by an obscure African virus that is threatening to transform the trade woes into a snowballing catastrophe affecting everything from the food on your family’s plates next week, to the stability of global financial markets and agricultural industries, to the health of dialysis patients around the world.

Last summer a hog farmer with a small, 400-pig operation in Shenyang, northeastern China, reported a disease was sweeping through his herd, with lethal outcome. By the time government investigators reached the scene, the disease had already spread to neighboring farms, swiftly killing over 10 percent of the swine. On Aug. 3, 2018, Zhang Zhongqui, the director general of the China Animal Disease Control Center, announced that African swine fever had, for the first time in history, broken out in China, where more than half of the world’s pork is consumed—56 billion pounds of it annually—and much of it is produced.

The extremely contagious virus causes animals’ vascular systems to collapse, bleeding out into organs and tissues throughout their bodies and killing them within four days. The disease is also notoriously hard to control, as there’s no rapid diagnostic tool farmers can use to tell if animals are infected, no treatment, and no vaccine—and anything including contaminated farmers’ shoes, feed buckets, and virus-laden transport vehicles can pass the virus on to pigs. The disease is not harmful to humans, but people can carry the virus on their clothing, hands, and equipment, unwittingly spreading it from pig to pig. And nobody has yet found an infected pig or boar that has survived African swine fever: It is nearly 100 percent lethal.

In 2017, experts warned that China was ill prepared to handle African swine fever if it reached the country, particularly now that the nation’s hog farming is rapidly shifting from a mostly family-based village model to massive-scale, U.S.-style industrial swine farming. Family farmers could be quarantined, their homes and animals typically confiscated by the Chinese state. But the industrial operations house thousands of hogs in tight confinement, fed and tended to by a small staff that moves from pig to pig, potentially acting as a vector for viral spread in a matter of a few hours to tens of thousands of animals.

China has proven the experts right—it has not been ready for an outbreak. Within a month of Zhang’s announcement of the first Shenyang outbreak, African swine fever spread to three other nearby districts. And it kept spreading, engulfing every pork-rearing area of the nation by early 2019. Some hog producers agreed to slaughter their entire herds, hoping to stop the epidemic. But when they brought in uninfected sows and piglets to restock their herds, the new animals quickly sickened, thanks to contaminated facilities. The virus is so contagious that one outbreak was traced to a courier mailing pouch delivered to a farm—the pouch, not its contents, spread the disease.

In October, Chinese authorities realized that their quarantine measures were failing because family-scale farmers were feeding kitchen waste to their pigs—a traditional practice that essentially renders the animals cannibals, eating remnants of other pigs. This is reminiscent of the 1988 mad cow epidemic in the United Kingdom, which was caused by feeding sheep and cow bone meal to cows, spreading bovine spongiform encephalopathy to entire herds of animals across the nation. Today it is illegal in the U.K. and EU to feed livestock meal made from body parts of their own species or other mammalian species. But with Chinese swine, the practice continues, which hastens the spread of African swine fever even when all other possible control measures are imposed. Worse, some factory-scale feed manufacturers in China have produced and sold contaminated protein powders made from hog cadavers.

China culled nearly a million pigs by the end of January, frantically trying to slow the epidemic. But by early May, China had logged at least 129 African swine fever outbreaks, located all over a nation with a $1 trillion hog industry, and the virus has spread to hogs in nearby pork-consuming nations: Taiwan, Vietnam, Mongolia, Cambodia, and North Korea. Thailand and Laos are both bracing for the likely arrival of swine fever to their herds. Smugglers and food exporters trying to bypass quarantine controls have taken pork products infected with the swine fever to markets in Japan, Taiwan, Australia, and South Korea. In October, the U.S. Department of Agriculture said there was no testing method for it to screen imported pork products for the disease. In March, U.S. Customs and Border Protection officials captured 50 shipping containers at the Port of New York and New Jersey loaded with 1 million pounds of deliberately mislabeled Chinese pork—a discovery that has American hog farmers worried that China’s swine fever will eventually hit U.S. pigs.

Under the Chinese zodiac, this is the Year of the Pig, but China has already lost an estimated 134 million pigs out of its 440 million swine and $128 billion pork industry. Forecasters say a total 2019 pig loss of 134 million—nearly half of China’s entire herd—seems likely. Pork products worldwide have been affected: The cost of pork in China is up 21 percent since this time last year, bacon prices spiked 20 percent in Spain in March, and pork shoulders are 17 percent more expensive in Germany. And other meats are costing more as people switch from high-priced pork to beef or chicken. The economist Arlan Suderman told Bloomberg Businessweek, “This is an unprecedented situation. This will impact food prices globally.”

Meanwhile, some 80 percent of Chinese farmers have decided not to restock their swine herds—until the government gives a green light, or they are sure African swine fever is gone. “The impact on China’s pork industry has been catastrophic. Farms are empty across China. Farmers have been directed to wait up to [six] months before restocking,” Brett Stuart, a co-founder of Global AgriTrends, told Time.

This, in turn, has had a major impact on the U.S. agriculture industry, which was once the main supplier of the soybeans and corn that China used to feed its pigs. As Chinese farmers have lost or culled their herds, demand for U.S. soybeans and corn has plummeted. By this time in 2018, American farmers had sold 28.7 million tons of soybean meal to China; so far in 2019, they have sold less than half that, 12.9 million tons. In mid-April, U.S. soybean exports sank from 888,700 metric tons one week to 460,700 tons the next—a fall likely due to African swine fever and swine herd losses in China. One commodities expert predicts 2019 and 2020 will both see a drop of 2 billion bushels in U.S. exports to China, dubbing the disease a “ train wreck in slow motion” for the American soybean market.

And that’s before accounting for the impact of new Chinese tariffs, in retaliation for the Trump administration’s tariffs on Chinese goods. In China, U.S. soybean meal is now $10 to $25 per ton more expensive than Brazilian soybeans due to the tariffs. Even if the swine fever epidemic were to miraculously come to a halt before the 2019 soybean harvest, experts say, China will not quickly rebuild its herds and restore U.S. soybean demand. Market recovery—at both ends of the trade dispute—could take three years or more. Assuming African swine fever continues to plague China for several years, as has been the case in Eastern Europe and Russia, America’s soybean farmers could be in dire straits for a long time. And this will only worsen if the Trump administration pushes tariffs still higher.

The Xi government also imposed tariffs on U.S. pork, totaling 62 percent, but demand in China for U.S. pork products is nevertheless high; Chinese orders for U.S. pork meat quintupled this March and April. That means the cost of bacon, pork chops, and other pork products will climb steadily for American consumers—and everybody else in the world—as the United States struggles to meet that demand. And inside China, economists are nervously watching soaring inflation in pork prices and spillover increases in costs for substitute meats like chicken, duck, and beef. The fear is that African swine fever could push the broader Chinese economy into runaway inflation.

Lurking in the background of this swine fever and tariffs situation in China are concerns about the world’s heparin supply. The primary blood thinner used worldwide to prevent some post-operative and dialysis patients from suffering or dying from blood clots, heparin is made from boiled pigs’ intestines. In China, slaughterhouses and pig farmers boil the swine offal until they have a crude mucus, which is then sold to Chinese pharmaceutical manufacturers, which isolate the key blood-thinning ingredient, formulate it in injectable form, and sell the heparin worldwide. In 2007, a different pig virus, causing porcine reproductive and respiratory syndrome, took a huge toll on China’s swine population, decreasing offal supplies. In the absence of sufficient crude product to meet their global heparin orders, Chinese manufacturers substituted a similar chemical, oversulfated chondroitin sulfate, which is about 100 times cheaper than the pig-derived ingredient—so the Chinese manufacturers stood to make a tidy profit.

The primary Western distributor, Baxter Healthcare, did not notice the difference. Nor did the U.S. Food and Drug Administration, which at the time lacked a testing system sophisticated enough to detect the swindle. The results were grim for patients. In the United States, 574 dialysis patients suffered allergic reactions to the oversulfated chondroitin sulfate, which killed 68 of them. European countries also had cases, and deaths, but no European Union agency published a detailed accounting of the problem. Nearly 80 percent of the world’s heparin ingredient supply is made in China, which is why a halving of the nation’s swine population should also be a major pharmaceutical concern for the world.

If trade negotiations stay sour between the United States and China, and tariffs increase, the worldwide markets for soybeans, pork, heparin, and dozens of other agricultural products could be disrupted. But that process would be grossly exacerbated by the African swine fever epidemic in China. As U.S. soybean producers suffer the double whammy of tariffs and lowered demand for hog meal, there will be ripple effects across agricultural economies in the United States. The only good news may be for Brazil, where soybean supplies, thanks to President Jair Bolsonaro’s assault on Amazon rainforest protections, are expected to soon grow rapidly.