“Hopefully it is just another scare tactic they are proposing,” said Obregon. “It will hurt the American consumer more than it will benefit them. The incoming administration is talking about health and being able to supply healthy products to the American consumer, and now they are talking about taxing 75-80 percent of all the fruits and vegetables that are consumed during the winter months. That’s contradictory and ridiculous.”
Obregon added that the increased retail prices for produce could result in consumers opting for cheaper, highly processed foods that are already contributing to the current health crisis that includes obesity and diabetes. Additionally, Mexico could levy retaliatory tariffs that would affect goods beyond produce.
“The American farmers will be hurt since the No. 1 market for U.S. pork is Mexico, and Mexico is a top market for U.S. beef and poultry,” he said.
Patrick Lucy, president of Del Rey Avocado Co. in Fallbrook, CA, said Del Rey has not done much preparation for the potential of tariffs. “We are paying attention to it, of course,” he said. “But we are in the mindset that the powers to be will understand that it won’t help the economy and will not help to lower food costs.”
He expects that any tariffs implemented will be done so on a targeted basis going after other product categories, such as computers and technology, rather than fresh produce.
Joe Bernardi, president of Bernardi & Associates Inc. in Nogales, AZ, is not overly concerned for produce. “I believe the proposed tariffs are just a negotiating tool that he (President Trump) is using to get Mexico and Canada to do what he wants them to do on immigration and drug enforcement. I don’t see the U.S. actually implementing those tariffs.”
Bernardi said President Trump’s actions when he was the president the first time indicate that he uses these threats to force action but doesn’t typically follow through. He also noted that U.S. manufacturers, such as the auto industry, have a much bigger stake in this tariff fight and will surely lobby the president against them. He doesn’t believe the produce industry will be driving the decision.
But asked to forecast the impact if Trump does implement the 25 percent tariff on all imports from Mexico as he has threatened, Bernardi said it will be the Mexican producer that suffers. “The market will be what it is regardless of the tariff,” he said. “The (FOB) price won’t be the market plus 25 percent. The tariff will impact the grower more than anybody else.”
Peter Shore, vice president of production for Calavo Growers Inc. in Santa Paula, CA, is concerned but opines that there is nothing an individual company can do about it. “The imposing of tariffs is a dynamic act that we are looking at but there is nothing we can do to stop it,” he said. “If a tariff comes, we will have to deal with it. There will be a lot to learn about how it will be governed and collected.”
While Shore’s tenure in the industry does not date to a time when tariffs were imposed on any imported avocados, he believes some Chilean avocados were once subjected to such a tariff. The Chilean-U.S. Free Trade Agreement, signed in 2004, eliminated all tariffs between the two countries.
Massimo Bergamini, executive director, Fruit and Vegetable Growers of Canada, said there is great concern north of the border. “This is a key topic of discussion for everyone,” he said of the threatened tariffs from the United States. “The potato growers are very concerned.”
Bergamini said many people think it is just bluster on Trump’s part. “My own sense is that we have to take him at his word. We have to prepare and be cognizant of the implications and consider the retaliatory measures our government can take.”
He added that his organization and others are currently working with the Canadian government looking at options if tariffs are imposed by the incoming U.S. administration.
He believes tariffs on Canadian products will be damaging to the U.S. produce industry and U.S. families as they will result in higher prices for U.S. consumers. “Food insecurity is a real issue,” Bergamini said. “It just doesn’t make sense to attack families in this manner.”
He revealed that the top fresh Canadian produce crops that would be impacted by far-reaching, rather than targeted, tariffs would be potatoes, greenhouse vegetables and blueberries to name a few. He noted that about 85 percent of Ontario’s greenhouse production is exported to U.S. markets.
Speaking in December, Ron Lemaire, president of the Canadian Produce Marketing Association, said Canada is getting prepared for the possibility. He revealed that the Canadian government is collecting data from the produce industry, as well as other sectors, to determine where the pain points are and opportunities might be.
He said the United States and Canada are very good trading partners with many fresh produce items sold between the two countries. He indicated that if the United States imposes tariffs on imports from Canada there will be a reciprocal tariff places on U.S. products coming into the country.
“Any type of tariff will drive up costs to the consumer,” Lemaire said. “And Canadian buyers will start to look at other suppliers.”
He said the free trade environment that has existed for a long time is a good thing that has worked to the benefit of both countries.
Lemaire added that the imposition of tariffs is counter to the U.S.-Mexico-Canada Agreement and he expects any such move will be challenged by both Mexico and Canada’s government officials.
He added the number of produce products impacted would be widespread and also reminded that Canadian households are very big consumers of U.S. produce for a large portion of the year when it is too cold to grow many crops north of the border.
Both Canadian representatives addressed this subject prior to the dynamic announcement from Prime Minister Justin Trudeau that he would resign and that the Canadian Parliament was suspended until late March. As such, it is unclear how the Canadian government would be able to immediately respond to any imposition of tariffs in the short term.
Lance Jungmeyer, president of the Fresh Produce Association of the Americas in Nogales, AZ, discussed the situation from the point of view of Mexican produce importers. He believes the threat should be taken seriously with necessary processes already in place if tariffs are imposed overnight on Jan. 20 when President Trump takes office. Though he believes the MCA and other U.S. laws and regulations could delay immediate imposition of tariffs, he is telling his members to not take that for granted.
Jungmeyer noted that the paying of the tariff rests squarely on the shoulders of the importer who must pay the bill to U.S. Customs before the product is allowed to cross the border into the United States. He said importers need to have bank accounts, lines of credit and bonds in place to cover those additional costs if tariffs are immediately imposed. Product will not be able to move across the border without the tariff being paid and he said the bill can add up quickly.
For example, currently Mexican avocados are selling at an extremely high price of $75 to $80 per carton. With 1,600 cartons per full load that creates a truckload value of significantly more than $100,000. Even a 10 percent tariff would create a very stiff bill; a 25 percent tariff, as has been floated, would be difficult to manage for many companies within a few days.
Jungmeyer said putting the mechanics in place to deal with the financial logistics will take time and he has been advising his members not to be caught flat-footed.
