What the latest round of pork tariffs could do to your Iowa grocery bill

Danny Lawhon | The Des Moines Register

Show Caption Hide Caption What does a trade war look like? We explain The last time a trade war happened in the U.S., things didn't go well for the economy. Will history repeat itself as Trump puts a tariff on steel and aluminum? Here are the facts.

Iowa's massive pork industry is back in the crosshairs as part of the United States' growing global trade conflict. And this targeting could eventually reach your pocketbook.

Mexico has promised to respond with tariffs on U.S. pork after America imposed steel and aluminum duties on its southern neighbor, Canada and the European Union.

When China slapped tariffs on U.S. pork in April, National Pork Producers Council spokesman Jim Monroe warned that a spat with a country in the North American Free Trade Agreement could cause critical damage.

"To rank it, suffice it to say that Mexico is there at the top (of concerns)," he said then.

Dragging out a conflict could cost the pork industry $1.5 billion, he said. Immediate losses for Iowa are already estimated at $560 million.

But what does this news mean for you, the consumer? We posed the question two months ago. We thought we'd ask again.

You might see some immediate price dips on ham

The duty is on the pig's legs, said Dermot Hayes, an economist at Iowa State University. The back two legs are what we know as the ham, and the front two are the shoulder.

A tariff makes foreign goods more expensive in order to make local items more attractive — or, alternately, punishes the larger providers.

One result often means an increased supply domestically. So ham and shoulder meat prices could see an immediate, albeit modest, price reduction here in the United States, Hayes said.

That said ...

"The average consumer will probably not notice," he said. "People are simply price-conscious, and they might be picking ham and shoulder meats more often" regardless.

MORE: Trump's tariff calls raise anxiety in the farm belt

But the retail pricing effect on the next 12 months is likely small

The long-range impact is likely smaller than what Steve Meyer, an economist for ag risk management firm Kerns and Associates in Ames, called the psychological impact. He's talking about stock market results and immediate futures prices.

Markets took a brief dive two months ago when China announced similar tariffs on U.S. products, but the stock market quickly stabilized.

Even then, industry experts said that the extended forecast is stable, simply because it takes a long time for producers to adjust production standards. Pigs are already being produced now for slaughter in April of 2019.

"You buy the rumor and sell the fact. The rumor price is going to go down," Meyer said. "You sell the fact that it'll probably be higher with time, and that's what I think will happen here. The real impact is not as great as the psychological impact."

With supply unlikely to dramatically change in the next year, don't expect prices to fluctuate much on a grand scale.

These tariffs could cost consumers if they stick around

But the key is that they'd have to stick around for a while. On a production level, Meyer said that a producer has to lose money for at least a year before considering reductions in output.

Do the math, and you're looking at least a couple years down the road before a dramatic shift could take place.

"It's not next week or next month. These things have very long tails," Meyer said. "The initial reaction is negative, but the long-term reaction likely won't be near that. I'm guessing everybody will come to their better senses."

Hayes takes a more holistic approach, and what he sees are tariffs and other "disruptions" in U.S. trade piling up. China has cut its U.S. soybean purchases within the last month, for example.

If the roof leaks in enough places, most people begin to notice.

"The point is the whole Iowa economy may start to suffer, and that is where consumers may notice," he said. "The average Iowan understands that our state's prosperity depends on agriculture. Keep closing agriculture markets, and you could see trouble throughout the state."