Smithfield Foods says tariffs make China unviable market for its US pork

Reuters
29 Apr
UPDATE 3-Smithfield Foods says tariffs make China unviable market for its US pork

Smithfield pivots business after China raises tariffs on US goods

Executives eye alternative markets for pork products

Company's Q1 sales rise 9.5% as hog production unit recovers

Adds shares climbing price in paragraph 7; details on consumer spending and job cuts in paragraphs 15-16

By Tom Polansek and Savyata Mishra

April 29 (Reuters) - China, the world's biggest pork consumer, is no longer a viable market for top U.S. pork processor Smithfield Foods SFD.O due to retaliatory tariffs by Beijing, company executives said on Tuesday.

The disruption shows how the tariff war escalated by U.S. President Donald Trump is upending global trade and forcing changes at a prominent food company that pays U.S. farmers to raise hogs that are slaughtered for meat.

China increased its levies on imports of U.S. goods this month, hitting back at Trump's decision to single out the world's No. 2 economy for higher duties.

Beijing's additional tariffs pushed China's effective duty rate on U.S. pork to 172%, according to industry data.

"With China no longer essentially being available, we really had to pivot our business," Smithfield CEO Shane Smith said on a quarterly earnings call.

Smithfield, which went public in January, posted a 9.5% rise in total sales to $3.77 billion in the first quarter that ended on March 30. Analysts expected $3.62 billion, according to LSEG data.

Shares climbed nearly 9%, as the hog production business rebounded from an operating loss last year.

China represents about 3% of Smithfield's sales, Smith said. The company has said it ships variety meat to China, such as pig stomachs, hearts and heads that U.S. consumers generally do not eat.

Before trade tensions escalated, Smith said in March that Smithfield believed China would still be the best market for variety meat with increased tariffs.

"While it's important, we do believe we have other options," he said on Tuesday.

Smithfield exports to more than 30 countries, according to the company, an indirect, majority-owned subsidiary of Hong Kong-based WH Group 0288.HK. It said exports accounted for 13% of sales last year.

The U.S. exported about $1.1 billion worth of pork products to China in 2024, U.S. government data show.

Trump has repeatedly urged Chinese President Xi Jinping to call him about a potential deal after slapping 145% tariffs on most Chinese goods.

"China, at 145%, is not a viable sales market for us at the moment," said Donovan Owens, president of Smithfield's fresh pork business. The company's strategy is to sell to the next best market, he added.

Smithfield also faces challenges from raw materials costs and as some consumers opt for cheaper products, executives said.

The company said it eliminated corporate and plant jobs in the first quarter to reduce expenses.

(Reporting by Savyata Mishra in Bengaluru and Tom Polansek in Chicago; Editing by Shinjini Ganguli, Emelia Sithole-Matarise, Aurora Ellis and David Gregorio)

((Thomas.Polansek@thomsonreuters.com))

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