Attaché: Mexican Processors Stick with U.S. Pork, Despite Tariffs

Posted on 02/20/2019 2:25 PM

In June 2018, Mexico hit a number of U.S. products with retaliatory tariffs in response to U.S. tariffs on Mexican steel and aluminum, including a 20% tariff on U.S. pork. That tariff remains in place, though Mexico did create a duty-free tariff rate 350,000 MT quota to limit the impact of the tariff on Mexican pork processors who rely on imports and to encourage imports from non-U.S. suppliers.

During the initial quota period from June 5 to Dec. 31, just 6,634 MT of the quota was utilized. That quota was then extended to Jan. 31, with just 105 MT of it being utilized the first month of 2019. And the quota has now been extended until March 31, with another 157,179 MT authorized.

Interestingly, a U.S. ag attaché in Mexico notes that “it appears that Mexican processors did not take advantage of the quota but rather maintained historical suppliers and imported the products at the higher tariff rates.” But the post adds, “it appears that U.S. producers are likely absorbing the extra costs of the tariffs by lowering their prices.”

The attaché explains that the tariffs initially lowered the amount of pork the U.S. exported to Mexico, with U.S. shipments to the country dropping 10% in June 2018 relative to the month prior and staying relatively low through the summer. But exports rebounded in September 2018 for the beginning of the holiday season, the post continues. “As of November 2018, U.S. exports of pork to Mexico had increased overall by more than 6% than at the same point in 2017,” the attaché elaborates.

While the U.S. still accounts for 85% of Mexico’s pork imports, which the attaché put at 1.2 MMT for 2018, the tariffs did encourage some other suppliers to step up to the plate. Namely, Canada gained a bit of market share, according to the post.

Many in the U.S. pork sector have been pushing the Trump administration to lift tariffs on steel and aluminum from Canada and Mexico now, as they have signaled they would lift their retaliatory penalties in response. But the President Donald Trump has signaled a reluctance to give up that possible leverage until the U.S.-Mexico-Canada Agreement is signed.

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