Will Trump’s Latest Tariff Tactics Threaten USMCA Passage?

USMCA ( MGN Image )

The United States will impose a 5% tariff on all goods coming into the U.S. from Mexico beginning June 10, President Trump said on Thursday evening. 

Trump said this tariff will be in place “until such time as illegal migrants coming through Mexico, and into our country, stop.” If this doesn’t happen, tariffs will escalate in steps to 25% by Oct. 1 if Mexico doesn't take action to slow illegal migration to the U.S.

“Tariffs will permanently remain at the 25% level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” Trump said in a White House statement. “Workers who come to our country through the legal admissions process, including those working on farms, ranches, and in other businesses, will be allowed easy passage.”

Mexico is America's largest trading partner, sending $346.5 billion in goods to the U.S. last year. 

“A 5% tariff on those products would amount to a tax increase of more than $17 billion, with major consequences for American consumers and businesses,” Pro Farmer’s Jim Wiesemeyer said.

The markets reacted quickly, and negatively, to Trump's tariff action. 

“Trump's latest shock tweet sent investors into safe haven assets, with gold climbing back above $1300/ounce, amid fears that another increase in tariffs could tip the U.S., and maybe the whole world, into recession. Along with a fall in global stocks, Dow futures slid 283 points on the news, while the 10-year U.S. Treasury yield declined 7 bps to a fresh 20-month low of 2.16% and the Mexican peso slipped 2.8% against the dollar,” Wiesemeyer said.

Mexico fired back quickly, however, vowing that tariffs would not go unanswered, he added. 

The National Pork Producers Council (NPPC) urged Trump to reconsider plans to open a new trade dispute with Mexico in a statement issued Friday.

"American pork producers cannot afford retaliatory tariffs from its largest export market, tariffs which Mexico will surely implement. Over the last year, trade disputes with Mexico and China have cost hard-working U.S. pork producers and their families approximately $2.5 billion,” said David Herring, NPPC president and a pork producer from Lillington, N.C.

What Does This Mean for USMCA?

Wiesemeyer believes the return to U.S. tariffs on Mexico could leave some lawmakers of both parties reluctant to vote for the U.S.-Mexico-Canada Agreement (USMCA), especially if Mexico issues the countermeasure they’ve threatened.

“House Speaker Nancy Pelosi (D-Calif.) was not pleased with the Trump action, saying it was ‘not a positive step’ as House Democrats continue to work with U.S. Trade Representative Robert Lighthizer to ‘ensure USMCA benefits American workers and farmers,’” Wiesemeyer said. “Pelosi said the administration action is premature since negotiations are not finished and ‘indicates a lack of knowledge’ about the process.”

NPPC urges the ratification of USMCA, preserving zero-tariff pork trade in North America for the long term. In addition, they are pushing for a completed trade agreement with Japan and resolved trade agreement with China, where the deadly African swine fever (ASF) virus is ravaging the world’s largest pork producer. U.S. pork has a historic opportunity to dramatically expand exports given the countries struggle with ASF, Herring said.
 
"We hope those members of Congress who are working to restrict the administration's trade relief programs take note,” Herring said. “While these programs provide only partial relief to the damage trade retaliation has exacted on U.S. agriculture, they are desperately needed. We need the full participation of all organizations involved in the U.S. pork supply chain for these programs to deliver their intended benefits."
 
For most of the last year, U.S. pork producers lost $12 per hog due to trade retaliation by Mexico, which was lifted last week, according to Iowa State University Economist Dermot Hayes. Hayes projects that the U.S. pork producers will lose the entire Mexican market, one that represented 20% of total U.S. pork exports last year, if they face protracted retaliation. As of April 1, the value of U.S. pork exports to Mexico were down 28% from the same period last year. 


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