Packers and cattlemen are anxious about White House talk of a 20 per cent tariff on Mexican imports to pay for President Donald Trump’s promise to build a wall.
Ninety per cent of Mexico’a 161,000 tonnes of beef exports in 2015 were to the United States, up from 60 per cent a few years earlier.
The United States also imports about one million live cattle from Mexico each year, which are slaughtered, or fed then slaughtered, in the United States, with some of the resulting beef products exported back to Mexico, according to Kent Bacus, director of international trade and market access for the National Cattlemen’s Beef Association.
He said Mexico has become the second-largest export destination for U.S. beef by volume and the third-largest in value.
The United States exports beef rounds, tongues, intestines and other cuts more popular in Mexico, while Mexico exports muscle cuts like ribeyes and tenderloins to the United States. Ground beef and beef trim trade goes both ways.
Bacus told Meatingplace Magazine the big concern would be trade disruptions that would limit U.S. feed yards and packing houses from running at optimum efficiency.
“We’ve seen this before under the five years of COOL (Country-of-Origin Labeling) when purchasing foreign-born cattle was discouraged. Feed yards were not run at optimal levels and neither were packing houses, and some of these had to close,” he said.
Mexican beef packer SuKarne recently built a large feedlot and packing plant in Tlahualilo, Durango, for its proximity to the U.S. market. SuKarne accounts for roughly 74 percent of Mexico’s beef exports, processing more than 1.2 million head of cattle annually.
There is now speculation that SuKarne will be wooing Chinese buyers.
“Mexico is not going to do this without reacting,” said Darrell Peel, an extension specialist with Colorado Sate University. Mexico might impose “at least a matching tariff” on U.S. exports to Mexico, he said.
Peel’s biggest concern for the beef industry, however, is the impact if U.S. poultry and pork exports to Mexico are disrupted.
In the January-November period in 2016, while 15.5 percent of U.S. beef exports went to Mexico, 30 percent of U.S. pork exports crossed the border, and more than 21 percent of broiler exports went south, Peel said.
“What does it mean to the beef industry if we suddenly have to eat a lot more pork and chicken we are not exporting? That’s the real impact,” said Peel.
According to the Peterson Institute for International Economics (PIIE), there are multiple ways President Trump could implement import tariffs without Congressional approval.
There are legally empowering provisions included in the Trade Expansion Act of 1962, Trade Act of 1974, International Emergency Economic Powers Act of 1977 and even the Trading with the Enemy Act of 1917.
“Any effort to block Trump’s actions through the courts or amend the authorizing statutes in Congress would be difficult and would certainly take time,” authors Marcus Noland, Gary Clyde Hufbauer, Sherman Robinson, and Tyler Moran wrote in a briefing paper.