Farmers lobby to steer away from trade war

Jason Lange AND Alexandra Alper -

Farmers in the US agricultural heartland that helped elect Donald Trump are now pushing his administration to avoid a trade dispute with Mexico, fearing

retaliatory tariffs that could hit over $3 billion in US exports.

The value of exports at risk is based on a Reuters analysis of a tariff list which Mexico used in a trucking dispute six years ago and which Mexican officials have said could serve as a model if President Trump sets new barriers to Mexican goods.

Producers contacted Trump’s transition team soon after the November 8 election to stress that tariff-free access to Mexico has made it their top export market by volume, said John Weber, president of the National Producers Council.

The council has sent the administration multiple letters, including one signed in January by 133 agricultural organisations, and is arranging for several farmers to fly to US next month to talk to officials.

“We just keep pounding them on how critical trade is to us,” said Weber, who fears Mexico could revive the list of mostly agricultural products it successfully used to push Washington into letting Mexican truckers on US highways in 2011.

“We’ll be the first to take the hit,” Weber said. The lobbying effort by US businesses which rely on the Mexican market shows how Mexico can press its case in Washington despite having an economy 1/17 the size of America’s and relying on the US market for nearly 80 per cent if its exports. Tariffs from Mexico could depress US wholesale prices and wipe out.

In December, after fears of a trade dispute fueled a deep peso slump, Mexico started mapping out US states that are most reliant on its market, replicating the strategy it used in the trucking dispute, said two senior Mexican officials.

Mexican officials also prepared briefs, seen by Reuters, on Mexico’s own risks in a dispute, including losing much of its cost advantage in building cars, such as the Ford Fusion made in Hermosillo, Mexico.

Reuters could not verify a complete list of products and states Mexico considered targeting this time around.

But the country’s foreign minister said last month tariffs could target Iowa.

The minister also said tariffs could aim at Wisconsin, the center of US cheese production, and has singled out Texas for its “notable” trade surplus with Mexico.

All three states voted for Trump in the 2016 election, with the president taking Iowa and Wisconsin by slim margins.

Trump has accused Mexico of destroying US jobs and has vowed to leave the 1994 North American Free Trade Agreement with Canada and Mexico if he cannot renegotiate better terms with Mexico. United States went from running a small trade surplus with Mexico in the early 1990s to a $63 billion deficit in 2016.

Cheese was also a top target in the trucking dispute in which Mexico retaliated with tariffs against rules that banned its trucks from US roads.

Some $200 million in current annual exports of cheese would be targeted if the tariff list were revived, according to the IHS database, which the US government uses to measure the impact of trade disputes.

The full tariff list would apply to $3.25 billion in current US exports.

John Holevoet, the director of government affairs at Wisconsin’s Dairy Business Association, said he has attended multiple meetings with Wisconsin federal lawmakers this year where risks of Mexican trade were discussed.

Weber of the producers group said he believed the Trump administration “gets it” when it comes to the vulnerability of US farm exports.

Republican Congressman Steve King, who represents Iowa’s agriculture-focused fourth district, also pointed out that Iowa’s role as the first state to hold presidential primaries helps keep farm interests in Washington’s view. But King said he was worried the White House is still not taking trade risks seriously enough.

A possible 20 per cent tax on Mexican imports, which White House spokesman Sean Spicer has said could also pay for Trump’s proposed border wall, would cause a trade war, he said. — Reuters