The trade war is getting serious for Minnesota farmers, especially hog producers. Mexico just placed an immediate 10 percent tariff on U.S. pork products — and will double it next month.
Hog prices have slumped in recent months, and the escalating trade dispute with Mexico is part of the reason.
Mexico's tariff announcement came as one of the hog industry's biggest trade shows, the World Pork Expo, got underway in Des Moines, Iowa. Minnesota hog producer Terry Wolters is there. He says the tariffs were a common subject of conversation, amidst concern they will hurt pork exports.
"We've really enjoyed a great run for a good number of years because of the benefits of our trade opportunities in foreign markets," said Wolters. "And as producers I would say we definitely want to continue to have market access."
In retaliation for U.S. steel and aluminum tariffs, Mexico placed similar sanctions on some $3 billion worth of U.S. goods, including pork. Minnesota Pork Producers Association CEO David Preisler said effective immediately Mexico has a 10 percent tariff on hams and other pork cuts. The tax will increase to 20 percent next month.
"And that just really puts us at quite a disadvantage from a standpoint of what may end up happening with demand in Mexico," said Preisler.
If the pork tariff reduces U.S. sales to Mexico, farmers fear it could set in motion a series of events that will damage their economic future. Mexico buys more pork from the United States than any other nation, nearly two billion pounds a year. But the tariffs could push down U.S. sales to Mexico since it makes American pork more expensive there.
That, in turn, may reduce demand for hogs and their market price, cutting farm profits. Preisler said he believes the trade issue may have already done that. At the beginning of the year, farmers were expected to average about a $10 profit on every pig they sold during 2018. Now he says the outlook is a $15 loss per animal.
"And really the only two material things that have changed in that time period are the tariff that has occurred from China, and now the tariff that will occur from Mexico," said Preisler.
China boosted an existing 12 percent tariff on U.S. pork by another 25 percent several months ago.
"We, as agriculture, end up collateral damage to this whole issue," said Minnesota Commissioner of Agriculture David Frederickson. "And that angers me."
Frederickson said President Trump's trade policies are damaging the state's rural economy, adding that that beginning farmers especially are affected.
"The only way they can cash flow is to build some kind of a hog finishing operation," said Frederickson. "And it's pretty shaky."
Many farmers are still hoping that the trade differences can be worked out before they cause long-lasting damage to the pork industry. But they wonder how many more trade tremors are ahead.