The looming trade war has gotten closer to home with neighbors hitting back against U.S. metal tariffs. U.S. meat and ag exports are getting pulled deeper into the fray.
As covered last week, President Donald Trump announced on May 31 that steel and aluminum tariffs would apply to previously-exempted Canada, Mexico, and the European Union, effective the very next day.
Mexico and Canada both responded to the last-minute reversal. Mexico, in particular, took aim at U.S. agriculture, targeting U.S. pork in its vow to retaliate in kind with U.S. tariffs.
“Faced with tariffs imposed by the U.S., Mexico will impose equivalent measures to various products such as flat steel (hot and cold foil, including coated and various tubes), lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, various cheeses, among others, up to an amount comparable to the level of affectation,” announced the Mexican Ministry of Economy in an online announcement (translated from Spanish via Google Translate).
“Mexico reiterates its openness to constructive dialogue with the U.S., its support for the international trading system and its rejection of unilateral protectionist measures.”
“It will be very unfortunate if U.S. pork exports to Mexico, which deliver tremendous benefits to both the U.S. supply chain and to Mexican consumers, importers, processors, retailers and restaurants, no longer enjoy duty-free access to this critical market,” said U.S. Meat Export Federation (USMEF) President and CEO, Dan Halstrom, in a prepared remark after the retaliatory plans of Mexico and Canada were announced.
“It is especially frustrating to see U.S. pork caught up in a dispute that has nothing whatsoever to do with pork trade.”
In an announcement on June 5, the Mexican Ministry of Economy announced that U.S. pork would see a 20 percent tariff. Other U.S. agricultural products will see tariffs between 20-25 percent.
According to USDA data compiled by USMEF, Mexico is the U.S.’ top pork export destination by volume, buying a third of the total 2.45 million metric tons exported in 2017. This was valued at $1.4 billion, making Mexico the second export destination for U.S. pork by value, only slightly behind Japan.
Canada also announced it would retaliate for the U.S. tariffs on steel and aluminum. In its detailed list of items targeted for retaliation was prepared beef meals and prepared and preserved beef. Though this directly targets beef, these items do not make up a significant portion of beef trade from the U.S. to Canada.
Other ag-related targets Canada outlined included yogurt, roasted coffee, prepared meals involving chicken, orange juice, nut products, jams and other processed fruit items, condiments, chocolate, and various pesticides for agricultural application. All of these items and the beef items mentioned above would see a 10 percent “surtax” from Canada. Canadian business stakeholders can submit comments on the proposed list until June 15. The tariffs would take effect on July 1.
Beef impact
Though Mexico’s actions do not directly impact beef, pork tariffs from the top pork export destination could impact the volume of pork in the domestic market. Increased pork on the domestic market does have the potential to negatively impact beef in competing for consumer dollars.
When asked what impact Mexico’s retaliation might have on pork export and domestic supply, Joe Schuele, vice president of communications at USMEF, said that it depends on the reactions of Mexico’s other pork suppliers.
“We are the primary supplier. Mexico is looking to diversify that, but not many alternate suppliers are equipped to displace U.S. pork.”
Mexico’s current pork suppliers other than the U.S. are primarily Canada and Chile, though the volumes coming from these countries are small when compared to what the U.S. exports to Mexico. However, they now have a distinct advantage over the U.S., noted Schuele.
“As of today, [Canada and Chile] do have a tariff-rate advantage on U.S. product that they didn’t have before.
He added that the June 5 announcement from Mexico included the creation of a duty-free quota on pork “in an effort to diversify supplies and lessen the impact on prices.”
It is possible other consumers of U.S. pork might take more product and lessen any potential effect of the Mexican tariffs.
Japan is the second-largest consumer of U.S. pork by volume after Mexico. However, the two countries import vastly different cuts. Mexico is the U.S.’ largest market for hams and takes “a significant volume of pork variety meat.” Japan on the other hand takes mostly loins and butts. Despite the name, pork butts are anatomically analogous to chuck in beef, coming from the neck and shoulder area of the hog carcass.
“Russia used to be a pretty large destination for hams because they have a pretty large processing industry, but, of course, the Russian market is closed,” Schuele continued. “China is a large destination for hams but tends to be somewhat volatile based on domestic production. Australia is a really strong, reliable market for hams.”
He also noted that South American countries like Honduras, Guatemala, Columbia and Chile are destinations for U.S. hams.
“Those are some examples of markets that would be likely candidates to take larger volumes if this tariff stays in place for an extended period, which we hope it doesn’t,” he added.
“It’s too early to tell what other markets for U.S. ham might become a more attractive destination for hams now that there’s a [duty] increase from Mexico.” — Kerry Halladay, WLJ editor
“It is especially frustrating to see U.S. pork caught up in a dispute that has nothing whatsoever to do with pork trade.”
