A New Tariff Threat in U.S. Rice’s Top Market

 
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Work it out
Jun 05, 2019
ARLINGTON, VA – Last week, President Trump announced that he was going to enact a 5 percent tariff on all imports from Mexico unless that country stops Central American migrants from crossing its southern border, presumably on their way north to the United States.  The new tariff, that is scheduled to go into effect on Monday, will also increase by an additional 5 percentage points each month until it hits 25 percent on October 1 if the President is not satisfied with Mexican efforts on immigration.

Mexico remains the United States’ largest market for U.S. rice, both in terms of value and tonnage, but the landscape has changed since Trump took office and over the past several years, Mexico has sought to diversify its suppliers.  Additionally, even though the U.S. pulled out of the Trans Pacific Partnership (TPP) agreement, Mexico remained, as did competitor Viet Nam, meaning the 20 percent tariff on rice coming from Asia to Mexico is being phased out per the new agreement.

“This is a pretty delicate time for trade between the U.S. and Mexico, and we hope this new tariff can be avoided,” said Bobby Hanks, a Louisiana miller and chairman of the USA Rice International Trade Policy Committee.  

Members of Congress on both sides of the aisle are voicing their opposition to the tariffs, threatening to use their power to block the President’s actions if he does in fact carry out his threat.  Yesterday, following a meeting at the White House between Senate Republicans and the Administration, Senate Majority Leader Mitch McConnell said, “There is not much support in my conference for tariffs — that’s for sure.”

The Mexican government is also alarmed by the tariff threat and the risk it poses to their economy as the U.S. is the destination for 80 percent of its exports.  This week a delegation of Mexican government representatives led by Foreign Minister Marcelo Ebrard traveled to Washington to meet with their American counterparts to discuss ways to avoid implementation of the tariffs.

The President’s actions last week occurred on the same day the draft Statement of Administrative Action (SAA) to implement the U.S. Mexico Canada Agreement (USMCA) was submitted to Congress by U.S. Trade Representative Robert Lighthizer.  The submission of the draft SAA notifies Congress that the Administration is moving forward in the ratification process.  The final SAA and legal text of the agreement can be delivered to Congress at any point 30 days after May 30.
 
Senator Chuck Grassley, chair of the Senate Finance Committee, opposes the tariffs and warned they would interfere with the passage of the USMCA.  "This is a misuse of presidential tariff authority and counter to congressional intent.  Following through on this threat would seriously jeopardize passage of USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country," Grassley stated.

“Getting USMCA passed and adopted prior to current agreements going away is vital to the rice industry and a top priority for us,” Hanks added.  “All the more reason to ease tensions with our number one export market.”

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