This round could be even more costly for U. S. agriculture and consumers.<\/b>
\nPresident Donald Trump threatened on Thursday to impose tariffs on all Mexican goods as a way to force the country to end illegal immigration across the southern border. In a tweet, Trump announced that the United States will add a 5 percent tariff on the countrys imports in June, adding that the tariff \u00ab\u00a0will gradually increase until the Illegal Immigration problem is remedied.\u00a0\u00bb
The presidents announcement has already disrupted U. S. markets and alarmed farmers and business owners, who are still paying the price of the presidents first trade war. Now, experts predict another round could cost the economy billions of dollars and undo recent efforts to stabilize trade.
Heres what economists say these tariffs could mean for both producers and consumers of these goods.
Mexico is the U. S.s third-largest trade partner. Experts say raising costs on imports will have a direct impact on the U. S. economy and consumers, and if Mexico retaliates as anticipated, it could decimate farmers who are already struggling.
Americans shopping for produce will be the first to feel the effects, according to Chad Hart, an agriculture economist at Iowa State University. The U. S. imported $26 billion in fruits, vegetables, and other foods from Mexico last year. Now, all of those will face a 5 percent tariff, which could escalate to as much as 25 percent if Mexico doesnt meet Trumps demands. \u00ab\u00a0Well likely see those prices ratchet up very quickly,\u00a0\u00bb Hart says. \u00ab\u00a0Especially when were talking about perishable products in a grocery store, theres not a lot of cushion in place to handle an additional 5 percent cost, so oftentimes that gets passed along to the consumer.\u00a0\u00bb
The tariffs could also raise prices for auto parts and construction materials, and industry groups that rely on these materials are not happy. Tariffs Hurt the Heartland, a national campaign representing more than 150 leaders in retail, tech, manufacturing, and agriculture, criticized the decision on Friday. \u00ab\u00a0Forcing Americans to pay more for everything from avocados and beer to jeans and electronics as a means to address border security makes no sense,\u00a0\u00bb representatives said in a statement. \u00ab\u00a0And using tariffs to address unrelated policy objectives sets a dangerous precedent while creating significant uncertainty for American employers who are living tweet-by-tweet while trying to plan their business.\u00a0\u00bb
The real fear for U. S. agriculture lies in potential retaliation, which several economists expect will target even more products. Just last week, the two countries resolved a nearly yearlong trade dispute, with the U. S. agreeing to lift tariffs on steel and aluminum, and Mexico easing retaliatory tariffs on U. S. agriculture products. \u00ab\u00a0This would seem to destroy all that forward momentum,\u00a0\u00bb Hart says.
If anything, he says, this round will be worse: \u00ab\u00a0You can argue this is a much larger deal. With steel and aluminum, it was two specific products. Were talking about tariffs on everything.\u00a0\u00bb
Based on Mexicos reaction last year, farmers expect their goods will once again be on the line. \u00ab\u00a0This is very concerning from the viewpoint of U. S. agriculture,\u00a0\u00bb Michael Nepveux, an economist with the American Farm Bureau Federation, says. \u00ab\u00a0I cant stress enough how big a deal it was to have the [steel and aluminum] tariffs removed. Nearly a week later, this is again in jeopardy.\u00a0\u00bb
Mexico is a top export market for U. S. pork, dairy, corn, and soybeans, some of which already took a hit in the trade war with China. Already, Trumps tariffs have resulted in the lowest U. S. agricultural exports in three years, according to the Food & Environment Reporting Networks analysis of U. S. Department of Agriculture forecasts. \u00ab\u00a0Farmers have been fighting this fight for the last year,\u00a0\u00bb Nepveux says. \u00ab\u00a0Agriculture has always been the tip of the spear when it comes to these trade disputes. This is just another challenge going forward.\u00a0\u00bb
Flooding in the Midwest has set back planting seasons to an extent that Nepveux calls \u00ab\u00a0astronomical.\u00a0\u00bb Meanwhile, producers who rely on undocumented and legal immigrants have experienced a labor shortage under Trump, whose anti-immigration policies often run counter to the needs of the U. S. food system.
The announcement could also jeopardize a key piece of Trumps agenda: the United States-Mexico-Canada Agreement, which has not yet been ratified. The deal would replace the North American Free Trade Agreement and has been generally well-received among agriculture and trade groups.
CBS reported Friday that Representative Collin Peterson (D-Minnesota), chairman of the House Committee on Agriculture, said the new tariffs on Mexico would make it \u00ab\u00a0virtually impossible\u00a0\u00bb to ratify the new agreement. When asked about how tariffs might affect these negotiations on Friday, Vice President Mike Pence said the USMCA was \u00ab\u00a0simply an idea whose time has come.\u00a0\u00bb
On top of the political consequences, the presidents strategy has also prompted legal questions. \u00ab\u00a0Trump is using trade policy to try to impact migration policy in another country,\u00a0\u00bb Hart says.
While this is not unprecedented, Hart says that the two do not have a direct relationship\u2014and Trumps decision to use one to affect the other could have a lasting impact: \u00ab\u00a0Hes basically… using trade as a lever to help put political pressure on Mexico to make changes to their internal policy. Its an approach that definitely creates some challenging precedents.\u00a0\u00bb<\/p>\n