Proposed import tariff on Mexico could present trade issues for Weld County ag producers
March 3, 2017
» Oil and gas effects
Petroleum producers also would be affected by any trade issues under the Trump administration, especially potential changes with Mexico and Canada.
Increased natural gas trade is driven by LNG export and pipeline exports to Mexico, according to information from the American Petroleum Institute. Mexico has moved away from oil as a fuel source and the country went through deregulation when oil prices were high, according to API Chief Economist Erica Bowman. Both U.S. and Mexican investors have spent billions of dollars on pipelines between the two countries.
“Colorado is a net energy producer and exporter,” she said. “No open access would have big impacts on our energy markets. We need open access to Mexico.”
Weld County is more than 700 miles from the closest Mexican border, but a proposed import tariff on the U.S.'s southern neighbor leaves local ag commodities in a state of uncertainty.
At the end of January, President Donald Trump suggested a 20 percent tariff on all imports from Mexico to pay for his long-promised wall between the bordering countries.
The move could spark a trade war that would harm Weld producers if Mexico executed a retaliatory tax or implemented trade barriers. Local producers could lose the income they get from exporting goods to Mexico. The tax also could raise prices on products for consumers in both countries or limit the products they could purchase.
Tom Lipetzky, trade spokesman for the Colorado Department of Agriculture, said if the tariff was implemented, the U.S. could expect Mexico to retaliate by imposing similar tariffs on U.S. products being exported to Mexico.
“Trade with Mexico is important in agriculture, and we, as in agricultural producers, benefit from trade with the country, and these are things that make us really look at that.The U.S. can’t lose any trading partner without it affecting our agriculture in Colorado.”
Mexico is the second-highest export market for Colorado producers, according to the U.S. Department of Commerce, and losing that income would gouge producers already hurting from low commodity prices in the states. According to the U.S. Department of Commerce, Mexico imported $1 billion in goods from Colorado in 2015. That includes technology, food and ag products.
Top exports from Colorado include beef, potatoes and corn, according to the U.S. Department of Commerce. Lipetzky said dairy products and dry beans also are major exports to Mexico. All of those are prominent in Weld County.
"Any loss of exports comes right back to hit (producers) pretty hard," he said. "Exports are really an opportunity for the U.S. industry to export some products that aren't as high in demand in the U.S."
He said the ability to export increases the value of products sold to international packers or processors. That benefits local producers who are exporting out of the country. If Mexico stopped demanding the products the U.S. doesn't use as much, producers could lose the extra profits from those items.
A study by the Metropolitan Policy Program at Brookings showed Greeley, Colo., and surrounding Weld County global exports accounted for a little under $1.5 billion of the Weld County economy in 2015 — that's 11.2 percent. Exports in Weld County also account for 8,781 jobs, including 3,716 direct jobs, the report stated.
Lipetzky said $133 million worth of beef was exported to Mexico this past year. That's down from the year before because the peso devalued about 20 percent.
"We saw beef imports from Colorado drop off about 13 to 14 percent from the prior year," he said. "If Mexico were to impose any tariffs on U.S. product, we could probably expect similar decreases."
Larry Lande, spokesman for Northern Feed and Bean, said the company exports a large chunk of its pinto and black beans to Mexico. Northern Feed and Bean could get hit hard if the U.S.'s southern neighbor were to tax exports on beans.
"Mexico is a very significant customer of ours," he said. "It depends what products they issue the tax on — if it's going to happen," Lande said. "Obviously, we would like not to see that. We hope to see everything resolved so there's no type of trade war."
He's unsure if beans are something Mexico would tax if it implemented an import tariff of its own since beans are a large part of the country's diet and culture. Lande said if Trump's proposed import tariff were implemented, he's unsure if the demand for beans to Mexico would lessen.
Mexico is unable to produce beans like the U.S. does, so there is a demand for them. If people want food, they'll find a way to pay for that food, he said. Lande said he hopes that would carry on if Mexico initiated a retaliation tax.
"Whenever you hear this type of stuff come up about possible trade issues, you always got to keep it in the back of your mind," he said.
That's something Mark Sponsler, CEO of Colorado Corn, agrees with. He said Mexico is a huge trade partner to the U.S., and even though a lot of the state's corn is used internally — meaning the state uses more corn than it exports — Colorado ultimately would be affected by Mexican retaliation.
Sponsler said many areas of the state ship corn directly to Mexico, meaning those prices could potentially increase.
A Mexican senator, Armando Rios Piter, said in mid-February he wants to introduce a bill that would halt the country from buying U.S. corn, and shift those purchases to Brazil and Argentina. Sponsler said that isn't something he views as an imminent threat, but it's something to address and keep in mind since it could hurt all U.S. corn farmers financially.
"Trade with Mexico is important in agriculture, and we, as in agricultural producers, benefit from trade with the country, and these are things that make us really look at that," he said. "The U.S. can't lose any trading partner without it affecting our agriculture in Colorado."
According to a report by WalletHub, Colorado is in the middle of the pack as far as being impacted by a potential trade war with Mexico — it ranked 24th. States that would be most affected are Texas, Arizona, Michigan, New Mexico and Kentucky.
The study evaluated imports and exports to and from Mexico as a share of total state exports and state gross domestic product. It also included share of jobs supported by trade with Mexico.
"If it happens is the big question here," Lande said. "All we can really do is wait and see." ❖