Amid talk by the White House on renegotiating the North American Free Trade Agreement, the relationship between the three signatories continues to deteriorate.
Mexico, on Tuesday, formalized trade retaliation efforts against the United States, a response to recent tariffs place by the Trump administration on Canada, Mexico, China, and the European Union.
In May, the White House imposed tariffs on $50 billion worth of Chinese products. The White House also announced new steel and aluminum tariffs imposed on Canada, Mexico, and the European Union. President Trump announced he was “taking action to protect America’s national security from the effects of global oversupply of steel and aluminum” by imposing a negotiable 25 percent tariff on steel imports and a 10 percent tariff on aluminum.
Mexico, on Tuesday, levied punitive tariffs (a 10 percent surcharge that is immediately in effect, increasing to 20-25 percent on July 5) on products from the United States, including unprocessed pork, cheese, potatoes, whiskey and bourbon, apples, cranberries, and steel and steel-based building materials.
The pork industry is among the critics of the multilateral trade brinksmanship. The National Pork Producers Council, a trade association, points out in a statement that Mexico’s decision follows similar retaliation in early April by China, “which imposed additional 25 percent tariffs on U.S. pork, reducing live hog values by as much as $18 per animal on an annualized basis.”
According to Iowa State University Economist Dermot Hayes, U.S. pork producers have lost $2.2 billion on an annualized basis due to events leading up to and following China’s 25 percent punitive tariffs in retaliation for U.S. tariffs on aluminum and steel.
“Since March 1, when speculation about Chinese retaliation against U.S. pork began, hog futures have dropped by $18 per animal, translating to a $2.2 billion loss on an annualized basis,” Hayes says. “While not all of this lost value can be attributed to trade friction with China, it is certainly the main factor.”
“The toll on rural America from escalating trade disputes with critically important trade partners is mounting,” says Jim Heimerl, NPPC president and a pork producer from Johnstown, Ohio. “Mexico is U.S. pork’s largest export market, representing nearly 25 percent of all U.S. pork shipments last year. A 20 percent tariff eliminates our ability to compete effectively in Mexico. This is devastating to my family and pork producing families across the United States.”
“We appreciate the variety of interests and issues the Trump administration is balancing in its trade negotiations with Mexico, China, and other countries. While producers are trying to be good soldiers, we’re taking on water fast,” he added. “The President has said that he would not abandon farmers. We take him at his word.”
The U.S. pork sector sustains more than 500,000 jobs across rural America. More than 110,000 of these jobs are directly tied to exports of American pork.
According to NPPC, the market disruption caused by export market uncertainty comes at a time when U.S. pork is expanding production to record levels. Five new pork processing plants have recently opened or will soon begin operations, increasing U.S. pork production capacity by approximately 10 percent from 2015 levels by next year. Exports accounted for more than $53 of the average $149 value of a hog last year and support over 110,000 U.S. jobs. The United States has, on average, been the top global supplier of pork over the last ten years.
For its part, Canada has also increased fees on a wide variety of U.S. goods. This includes a 10 percent surtax, or similar trade-restrictive measures, on imports on U.S. produced yogurt, roasted coffee, maple sugar and maple syrup, licorice candy and toffee, pizza and quiche, cucumbers and gherkins, strawberry jam, soy sauce, orange juice, tomato ketchup and other tomato sauces, prepared mustard, mayonnaise and salad dressing, whiskey, manicure or pedicure preparations, after shave, insecticides, toilet paper, plywood, beer kegs, sleeping bags, playing cards, ball point pens, and dishwasher detergents.
Added to the list are “preparations for perfuming or deodorizing rooms, including odoriferous preparations used during religious rites,” and “candles and tapers and the like not including those for birthdays, Christmas, or other festive occasions.” Various aluminum products are also on the list, some with a 20 percent surtax.