|As China decides to slap tariffs on $3 billion worth of U.S. imports, including pork products it will have a direct impact on one of their own companies that operates in the US. Smithfield Foods has been owned by China since 2013.|
April 4, 2018
HONG KONG (CNNMoney) - A Chinese company is set to become a casualty of Beijing's new tariffs on U.S. exports.
China's move this week to slap tariffs on $3 billion worth of U.S. imports, including pork products, is a blow to Virginia-based Smithfield Foods, the world's biggest pork producer.
Smithfield was bought in 2013 by China's WH Group for around $5 billion in what at the time was the biggest ever foreign takeover of a U.S. company.
"There's no doubt that the new tariff regime will be a headache for WH Group," said Loren Puette, director at ChinaAg, an agricultural research firm.
The Hong Kong-listed shares of WH Group have plunged more than 11 percent since Beijing first proposed sanctioning imports of pork from the United States less than two weeks ago. On Monday, it went ahead with a 25 percent tariff on all pork imports.
China is the third largest international market by value for American pork producers. Last year, they exported almost half a million tons of hog meat -- worth about $1.1 billion -- to the country, according to the United States Meat Export Federation, an industry group.
Valerie Law, an independent analyst in Singapore who follows the WH Group's stock, said the Chinese tariffs could reduce the company's operating profits by 12 percent to 18 percent.
A U.S.-based spokesperson for Smithfield declined to comment Monday on the potential impact of the tariffs. WH Group didn't respond to a request for comment.
Before the tariffs came into force, Smithfield CEO Kenneth Sullivan said he thought investors had overreacted to the news.
"We export to 40 countries around the world," he said last week. While admitting that the measures "will cut into our profits," Sullivan said exports to China only made up between 5 percent and 7 percent of Smithfield's fresh pork business.
Other U.S. pork producers that are expected to be hit by the tariffs, including Tyson Foods, whose stock dropped more than 6 percent on Monday.
A further escalation in trade tensions could make things even worse for WH Group.
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