Saturday, July 13, 2024

Second stage of retaliatory tariffs on US products takes effect today

A second stage of retaliatory tariffs on a range of United States imports to Mexico took effect today, just over a month after the U.S. imposed duties on aluminum and steel.

The federal government has now introduced tariffs on 91 United States products and the duty on pork increased today from 10% to 20%.

Other products targeted include potatoes, whiskey, apples, cranberries, a variety of cheeses and some steel products with tariffs mainly ranging between 15% and 25%.

The first round of measures took effect on June 5, just four days after the United States lifted exemptions on Mexican metal imports.

The government has said that the tariffs will remain in place as long as the United States continues to tax Mexican steel and aluminum at rates of 25% and 10% respectively.

Mexico staggered the introduction of tariffs on pork in two stages so as not to affect supply and thus avoid sudden price changes in the domestic market, said Juan Carlos Anaya, the CEO of agricultural market consultancy firm GCMA.

Mexicans consume 2.11 million tonnes of pork annually, making it the second most popular meat in the country.

United States producers sold just over US $1.8 billion worth of pork to its southern neighbor last year to make up for the shortfall in domestic production.

U.S. pork accounted for 86% of all imports of the meat last year but following the introduction of the first stage of retaliatory measures, Economy Secretary Ildefonso Guajardo said that Mexico would “surely” look to import more pork from Europe.

The first shipment of German pork since the tit-for-tat tariffs were imposed arrived in Mexico in the middle of last month.

United States President Donald Trump’s decision to impose tariffs on both Mexican and Canadian metal imports further escalated trade tensions that were already present due to differences on contentious issues related to the ongoing process to renegotiate the North American Free Trade Agreement (NAFTA).

President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau rebuked the United States’ decision to move towards greater protectionism but both also reaffirmed their commitment to reaching a renewed NAFTA deal that benefits all three countries.

Trump, on the other hand, floated the idea that the U.S. could seek to strike separate deals with its two neighbors and he reiterated that idea during a telephone conversation Monday with president-elect Andrés Manuel López Obrador.

AMLO, as Mexico’s next president is best known, has not directly addressed Trump’s metal tariffs but has said repeatedly that he wants to avoid a trade war with the U.S. given its importance to Mexican consumers and exporters.

In a television interview after he spoke to Trump Monday, he said that the two countries “are not going to fight” and stressed that the United States is “our main economic-commercial partner.”

However, he has also said as recently as last week that Mexico “will never be a piñata for a foreign government.”

News website Politico said today that “it’s unlikely that Trump’s trade policy will go a long way toward harboring close ties with López Obrador.”

There has been little progress on NAFTA since the tariffs were introduced although both Guajardo and Canada’s chief negotiator, Foreign Minister Chrystia Freeland, have charged that they are not directly related to the renegotiation talks.

The United States’ move to introduce the tariffs on Mexico and Canada was widely seen as a strategy to exert pressure on the two countries to agree to U.S. demands to reach a new NAFTA.

Former United States commerce secretary Carlos Gutierrez described the tariffs as being part of a “gun-to-the-head negotiating style” that actually made it more difficult to agree to a deal “without committing suicide domestically.”

But instead of caving in, Mexico proceeded to strategically select products on which to impose its own tariffs that, according to Guajardo, “don’t have an important impact on national consumption” and don’t “have an important impact on the topic on inflation.”

However, the products chosen “have implications in some districts where there’s important congressmen and senators,” Guajardo said last month.

For example, tariffs on cheese hit Wisconsin — the home state of House Speaker Paul Ryan — while those on steel hit producers in Vice-President Mike Pence’s home state of Indiana.

With mid-term elections coming up in the United States in November, Mexico hopes that by targeting states that are politically important to Trump, the U.S. president might be pressured into rethinking the wisdom of applying tariffs on a key market for American producers.

Jim Heimerl, president of the U.S. National Pork Producers Council, has already spoken out against the tariffs, charging that it eliminates his country’s ability to compete in the Mexican market.

American dairy producers have also said that they will be hurt because around 25% of all U.S. exports in the sector go to Mexico.

More than 50 dairy groups wrote to Trump last month to urge him to drop the tariffs, charging that they would only serve to benefit producers in the European Union, which reached a new trade agreement with Mexico in April.

In addition to imposing its own retaliatory tariffs, Mexico said last month that it would challenge the United States’ metal duties at the World Trade Organization on the grounds that they violate international trade rules.

Source: Vanguardia (sp), Politico (en)

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