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June 4, 2018

Mexico pork tariff could escalate Iowa's losses to US$560 million

US pork producers in Iowa, already dealing with a 25% tariff on US pork exports to China, could face another trade hit, with Mexico considering a 20% tariff on hams and pork shoulders, Des Moines Register reported.

Growing trade worries have cut pork prices in recent weeks, costing Iowa producers about US$560 million, said Dermot Hayes, an Iowa State University economist.

Mexico is the largest export market for US pork, based on volume. The country bought US$1.5 billion of US pork last year, followed by China-Hong Kong at nearly US$1.1 billion.
The tariffs are "potentially devastating news for Iowa's pig farmers and the rural Iowa economy," said Gregg Hora, president of the Iowa Pork Producers Association.
The state is the US's biggest pork producer, raising about 40 to 50 million animals annually.
The association said about 27% of all Iowa and US production is exported, accounting for nearly 40% of an average animal's value last year.
Hora said he hopes the US, Canada and Mexico trade officials stop using food as a "negotiating tactic."
The added costs with the tariffs hurt consumers in China and potentially Mexico.
"We've worked many years, spent a lot of time and money building trade relationships to expand markets in Canada, Mexico and other key economic trading countries," Hora said.
"We're concerned about the loss of market share we've built up over the years," he said, adding that he hopes US trade officials "rectify this situation immediately."
US President Donald Trump recently announced the country would implement a 25% tariff on steel and 10% tariff on aluminum imported from Mexico, Canada and the EU.
In response, Canada said that it would levy tariffs on US$12.8 billion in US goods, including steel, aluminum and whiskey.
Europe has proposed targeting US icons such as Harley-Davidson, Levi's jeans and Kentucky bourbon. Mexico also said it would look at tariffs on steel, blueberries and other products.
The threat of pork tariffs comes during peak demand - summertime grilling.
"This should be an extremely profitable time for producers, but that's no longer the case," Hayes said.
The pork industry normally would look to China to buy its excess pork, "but China's now closed," he said, with its tariffs making US products less competitive.
He said producers had been close to breaking even financially before the tariffs were introduced, but now they're looking at losses.
Most producers should be able to withstand the hit, with strong profits since 2014. "They're going into this with really strong balance sheets," Hayes said.
Even though the trade disruption hurts Iowa farmers, it will help consumers with increased pork supplies.
- Des Moines Register
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