Amid Cinco de Mayo celebrations, a tax on Mexican tomatoes looms

Article content

Guacamole has been spared from tariffs for now. But salsa may not be so lucky.

Article content

Article content

While threatened tariffs on Mexican avocados have been put on pause, the U.S. government plans to put a nearly 21% duty on fresh Mexican tomatoes starting July 14. A duty — like a tariff — is a tax on imports, and this one will impact the 4 billion pounds of tomatoes the U.S. imports from Mexico each year.

Article content

Proponents say the duty will help rebuild the shrinking U.S. tomato industry and ensure that produce eaten in the U.S. is also grown there. Mexico currently supplies around 70% of U.S. tomato market, up from 30% two decades ago, according to the Florida Tomato Exchange, a trade group.

Article content

Article content

“Unless we even the playing field in terms of fair pricing, you’re not going to have a domestic industry for fresh tomatoes in the very near future,” said Robert Guenther, the executive vice president of the Florida Tomato Exchange. Florida and California are the top U.S. producers of tomatoes, but most of California’s crop is turned into sauces and other products.

Article content

Article content

Opponents say the duty will make fresh tomatoes more expensive for U.S. buyers. NatureSweet, a San Antonio-based company that grows tomatoes in Mexico as well as the U.S., said it will be paying millions of dollars each month in duties if the decision isn’t reversed.

Article content

“We will look for ways to adapt or streamline our operations, but the truth is, we are always doing that so we run an efficient business already,” said Skip Hulett, NatureSweet’s chief legal officer. “Produce is not a large-margin business. We’re determining what portion of the cost we could absorb, but these added costs will most certainly need to be passed on to the consumer.”

Article content

Tim Richards, a professor at the Morrison School of Agribusiness at Arizona State University, expects U.S. retail prices for tomatoes to rise by around 10.5% if the tariffs go through.

Article content

Article content

Mexico’s government said last month it was convinced it could negotiate over the issue. But if the duty goes into effect, Mexican President Claudia Sheinbaum hinted that Mexico could take similar action against imported chicken and pork legs from the U.S.

Article content

The tug-of-war over tomatoes has a long history. In 1996, shortly after the North American Free Trade Agreement went into effect, the U.S. Department of Commerce investigated allegations that Mexico was exporting tomatoes to the U.S. at artificially low prices, a practice known as dumping.

Article content

The U.S. government agreed to suspend the investigation if Mexico met certain rules, including selling its tomatoes at a minimum price. Since then, the agreement has been subject to periodic reviews, but the two sides have always reached an agreement that avoided duties.

Article content

But last month, the Commerce Department announced its withdrawal from the latest agreement, saying it has been “flooded with comments” from U.S. tomato growers who want better protection from Mexican imports.

Article content

Guenther, of the Florida Tomato Exchange, said even though Mexican exporters are required to charge a minimum price, shipments are only spot-checked, so exporters can get around that. But more generally, Mexico hurts the U.S. industry because it costs 40% to 50% less to grow tomatoes there, Guenther said. Land is cheaper, labor is cheaper and inputs like seeds and fertilizer cost less, he said.