Mexico will import more pork products from Europe after imposing a 20 percent tariff on USA pork legs and shoulders in retaliation to steel tariffs, Economy Minister Ildefonso Guajardo said Tuesday. In addition, China would buy more USA crude oil and natural gas exports to quench its thirst for energy.
On Tuesday, Mexico announced a 20 percent tariff on US apples in response to the Trump administration's tariffs on steel and aluminum. More importantly, steel exports to the US make up more than half of total Canadian production.
Of the nearly $6.5 billion worth of pork exports from the U.S.in 2017, nearly a quarter - over $1.5 billion - was imported by Mexico, data from the U.S. Department of Agriculture showed.
The package would include increased purchases of US soybeans, corn and other agricultural goods. Canada announced dollar-for-dollar tariffs on steel and aluminum, as well as sanctions of 15 percent to 25 percent on whiskey, orange juice and other food products.
The potential economic effect on U.S. exporters could damage Republican support ahead of November's midterms. But growers will look for other export markets to make up for lost sales to Mexico.
The reaction of the EU, Canada and Mexico raises the possibility the U.S.is facing down a full-blown trade war - even as it does the same with China.
Mexican negotiators say they won't consider splitting negotiations for a matter that should be covered under the North American Free Trade Agreement, a 1994 pact among the United States, Mexico and Canada. "Canada's a different country than Mexico".
The Mexican peso dropped sharply versus the dollar early Tuesday after top White House economic adviser Larry Kudlow suggested the U.S. could engage in separate trade talks with Mexico and Canada.
US-Mexico trade is worth about $600bn annually and about 16% of US goods go to its southern neighbour. Canada dominates, supplying more than a quarter of all USA steel, aluminum and iron imports in 2016.
He said pork supplementing pork from other countries would require it be frozen, raising handling costs.
A tariff is basically a tax on imports that raises the price of foreign company's products for American consumers, putting imports at a disadvantage to domestic producers. This can hurt economies and lead to rising political tensions. They're likely to buy cheaper local products instead, boosting your country's economy.
"When you have to compromise with a whole bunch of countries, you get the worst of the deals", Kudlow said.