Source: Tom Johnston, MEATINGPLACE, 6/18/18



The U.S. pork industry stands to lose hundreds of millions of dollars due to tariffs that Mexico imposed on U.S. pork in retaliation to the Trump administration’s tariffs on Mexican steel and aluminum, according to a new report from the U.S. Meat Export Federation (USMEF).

The loss of market share in Mexico, the top foreign market for U.S. pork, as a result of its retaliatory tariffs will lower the value of U.S. pork because products that will not go to Mexico would be absorbed by other markets and the domestic market — at lower prices, USMEF said.

“Looking only at ham prices, the drop in the primal value could translate into losses to the industry of more than $300 million for the remainder of the year, which would be roughly $600 million over the next year,” the report states. “Picnics are the other primal likely to be impacted. The added negative price pressure for picnics and hams could result in industry losses of $425 million for July-Dec.2018 and $835 million over the next year.”

The duties Mexico implemented, effective immediately following U.S. implementation of its tariffs on June 5, include a 10 percent tariff on chilled/frozen pork until July 5, after which they will increase to 20 percent. Mexico created a new commodity code for pork-only sausages and applied a 15 percent duty to those products. It also applied a 20 percent duty to some cooked ham and shoulder products.

“Mexico has effectively eliminated the NAFTA benefit … ,” the USMEF report states.

Meanwhile, Mexico has established a duty-free tariff rate quota (TRQ) for 350,000 metric tons of chilled/frozen pork open until Dec. 31, with import licenses available on a first-come, first-served basis and with 97 percent allocated to historical importers. The U.S. exported 363,718 metric tons of chilled/frozen pork to Mexico in the second half of last year.

“There has been great uncertainty about how the quota will function, but USMEF … now understands that companies have not been successful in applying for import licenses for importing U.S. pork,” the group said. “In other words, it is true that U.S. pork covered by the duties will indeed pay the respective tariff rates and will not be imported under the quota.”

USMEF projects that Canada will be the main beneficiary of Mexico’s tariffs on U.S. pork in the shore term, and the EU will be the primary beneficiary in the long term.

In general, according to USMEF, the new duties and new pork TRQ will likely result in:
• Lower volumes of U.S. pork exports;
• Lower U.S. pork prices;
• Lower U.S. share of Mexico’s chilled/frozen pork import market;
• Substitution of more imported turkey for pork in Mexico’s processing industry; and
• More features of poultry by Mexican retailers

The USMEF report, dated June 14, came as U.S. and Canadian officials agreed to continue talks on a potential revision of NAFTA, and as President Trump followed through on $50 billion in tariffs on China, which also said it will impose retaliatory tariffs on U.S. pork, as well as U.S. beef and poultry.

USMEF said the group plans to provide further analysis on Mexico, China, the EU and Japan in an expanded paper.

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