Trump says there’s a ‘good chance’ that Mexico averts tariffs with deal that includes purchase of US farm goods

GS: Donald Trump 190602 1
President Donald Trump talks to the media before he departs the White House
on June 02, 2019 in Washington, DC.
Tasos Katopodis | Getty Images

President Donald Trump said Friday that Mexico may be able to avert tariffs on its goods by purchasing American agricultural products. Trump had previously said that escalating tariffs would be imposed, starting Monday, until Mexico took steps to stem unlawful immigration to the U.S.

“If we are able to make the deal with Mexico, & there is a good chance that we will, they will begin purchasing Farm & Agricultural products at very high levels, starting immediately,” Trump wrote in a post on Twitter. “If we are unable to make the deal, Mexico will begin paying Tariffs at the 5% level on Monday!”

The Mexican peso hit session highs after Trump’s tweet before edging down. Tariffs are paid by the domestic importer of goods, not the foreign exporter.

The tweet was posted while Trump was aboard Air Force One on his way back from Europe. U.S. and Mexican officials were meeting in Washington for the third day of talks aimed at resolving American border security concerns.

A White House spokesman did not immediately respond to questions from CNBC about agricultural exports, and the degree to which they were part of talks with Mexico. The Mexican Foreign Ministry did not immediately provide comment.

“This seems very odd to me,” said former U.S. Department of Agriculture Chief Economist Joseph Glauber, senior research fellow at the International Food Policy Research Institute in Washington. “I am not even sure what a commitment like this would mean since private importers [in Mexico] do most of the buying.”

In 2018, the U.S. exported about $19 billion worth of agricultural products to Mexico, making it the second-largest buyer of U.S. farm-related products after Canada.

For many U.S. agricultural commodities, Mexico is the top buyer, including corn, rice, dairy products, poultry, eggs and pecans. Mexico also buys corn from South America and could potentially increase its purchases from the U.S. to help feed its livestock and for tortilla products.

Mexico also ranks as a major buyer of U.S. beef, pork, soybeans and wheat. Mexico, however, has looked to other global suppliers for its soybeans and wheat, especially Argentina and Brazil.

But the U.S. is a major importer of Mexican tomatoes, strawberries and avocados. It has led some U.S. farmers in the Southeast region to complain that Mexico is “dumping” fresh produce into the U.S. market.

“On the import side, there are a number of producer groups who would like protection against Mexico products,” said Glauber. “Florida tomato growers. Sugar producers. Some Southeast specialty crop growers.”

Last year, Florida specialty crop producers urged the Trump administration to negotiate a special anti-dumping provision in the new United States-Mexico-Canada Agreement that would have allowed anti-dumping and so-called countervailing duty cases to be filed. The Southeast growers argued that an anti-dumping provision in a new trade deal would give U.S. farmers more leverage to hold Mexico accountable for not playing by the rules.

Yet some producer groups in California and in other U.S. Western states cautioned against including an anti-dumping provision in the replacement trade pact for NAFTA. They warned it could be used by Canada or Mexico to make a “dumping” case against U.S.-grown seasonal crops such as apples. In the end, an anti-dumping provision was left out of the negotiated USMCA.

After the Trump administration last year imposed tariffs on imported steel and aluminum from Mexico and other nations, Mexico retaliated with levies on $3 billion of U.S. goods, including cheese, pork, whiskey and certain fruits. Still, Mexico retained its position as the top buyer of U.S. cheese in 2018 although the EU has been pushing to increase its sales of cheese to the Mexican market.

Through April, U.S. ag exports to Mexico were up a scant 2% to $6.1 billion, according to the USDA. The weak growth is due largely to a decline in the value of pork exports south of the border. Still, sales of corn, wheat and soybeans were up by double-digit percentage levels, while dairy products were up by 6%.

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