Planned duties on Mexican and Canadian imports risk higher prices for consumers and damage to supply chains
Leading figures in North America’s fresh produce business have told Fruitnet that Donald Trump’s plan to impose a 25 per cent tariff on all imports from Mexico and Canada could lead to a disastrous decline in demand for fruit and vegetables, as well as major disruption to supply chains across the region.
“Imposing tariffs on Mexican and Canadian products could lead to negative consequences for the region, the US included, potentially resulting in increased inflation and a decrease in overall consumption,” said Carlos Madariaga, chief commercial officer at Mexican exporter Berries Paradise.
On Monday 25 November, the president-elect said the tariff would come into effect immediately after his inauguration on 20 January, and apply until the targeted countries prevented illegal immigration and drug smuggling into the US. He also announced an additional 10 per cent duty on all goods from China.
In value terms, Mexico accounts for around half of the fresh fruit and about 70 per cent of the fresh vegetables imported into the US each year.
Canada, meanwhile, supplies around 20 per cent of the country’s imported fresh vegetables, plus a small proportion of its fresh fruit.
John Pandol, director of special projects for California-based distributor Pandol Brothers, said he feared the produce business was at great risk of collateral damage if trade relations between the US and its neighbours began to break down.
“The idea should be to get more budget-conscious, unhealthy folks to eat more fresh produce, not less,” he observed. “If the additional tariff or non-tariff barriers stay in place long enough, consumers will find a substitute good or a substitute origin.”
In a comment piece published by Fruitnet, Pandol suggested fruit and vegetables would inevitably be caught in the crossfire.
“In the US, much of our business with Canada is forward-priced programmes. So what happens when a large and unexpected extra cost is added?” he wrote.
“I have to reduce my price, the grocer has to reduce their margins, and the consumer pays more – and likely buys less. As a trader, we face the same risk in the US with imported product. Everybody loses.”
Opposite effect
Allison Moore, executive vice-president of the Fresh Produce Association of the Americas (FPAA), predicted the tariffs would do little to protect consumers.
“President-elect Trump has been vocal about helping make the price of groceries for American families more affordable. Tariffs would have the opposite effect of making groceries more costly for Americans ,” she argued.
“Consumers rely on fresh produce imported by US companies to have access to fresh fruits and vegetables year-round. If there were tariffs on imported fresh produce, consumers would see sticker-shock at supermarkets, while restaurants likewise would raise menu prices.”
Moore added: “US companies have created supply chains across North America to improve food security. Tariffs would impact the US supply of fresh produce, and it would harm US companies that rely on trade to create jobs across the country.”
For Pandol, any escalation in retaliatory protectionism as a result of Trump’s tariffs could send shockwaves through North America’s fresh produce supply chains.
“US agriculture has invested in production and processing capacity to service these trading partners, because they have been reliable markets,” he noted. “If we lose or reduce export markets, what do we do with that sudden surplus capacity?”
Madariaga said he was realistic about the motives behind the president-elect’s strategy on international trade – particularly when it comes to handling illegal immigration and the challenges posed by drug cartels.
“We understand his approach to handling situations with other countries, and one of the key methods of influence is through commerce,” he said. “[Trump] recognises how important the US market is for both Mexico and Canada, but what seems to be missing is the fact that we could be talking about one of the most important regions globally, with a high level of interconnectedness between the three countries.”
