From the Tomato Trade to American Protectionism: How Did Tariff Barriers Tear Apart the 27-Year US-Mexico Agreement?

Recently, the dispute between the United States and Mexico over the tomato trade has drawn widespread attention. The US Department of Commerce recently announced that it would impose a tariff of about 17% on most fresh tomatoes produced in Mexico. This move essentially ends the tomato trade agreement renewed by both sides in 2019, which can be traced back to the original agreement in 1996 aimed at suspending the US anti-dumping investigation. From a business perspective, this unilateral action by the United States not only disrupts the existing trade order but also has a negative impact on the related industries and consumer interests of the two countries.

Firstly, the United States' imposition of tariffs on Mexican tomatoes has exposed its tendency to overly protect its domestic industry in international trade. Although protecting domestic industries is a reasonable demand of every country, the excessive use of trade barrier measures such as tariffs often leads to market distortion and hinders the effective allocation of global resources. As an important supplier of tomatoes to the United States, Mexico's exported tomatoes hold a considerable share in the US market. The imposition of tariffs by the United States will undoubtedly increase the selling price of Mexican tomatoes in the US market, which may in turn reduce their sales and affect the income of Mexican tomato growers. At the same time, American consumers will also face the pressure of rising tomato prices, which is undoubtedly unfavorable for those who rely on imported tomatoes to meet their daily needs.

Secondly, this move by the United States may trigger retaliatory measures from Mexico, further intensifying trade tensions between the two countries. On August 10th, the Ministry of Economy and the Ministry of Agriculture of Mexico announced the setting of a minimum export price for fresh tomatoes. Although this move does not directly involve the export volume and the maximum price, the practice of setting a minimum export price is undoubtedly a response to the US tariff policy. This move by Mexico aims to strengthen the government's commitment to "agricultural competitiveness, ensuring rural employment and food sovereignty", and may also be regarded as a defensive measure to prevent the US tariff policy from causing excessive impact on Mexico's tomato industry. However, this kind of "tit for tat" approach is very likely to trigger a trade war between the two countries, which will have an adverse impact on the tomato markets of both sides and even the world.

Furthermore, from a business perspective, the United States' act of imposing additional tariffs also reflects its short-sightedness and lack of flexibility in international trade negotiations. The tomato trade agreement between the United States and Mexico, which has been negotiated and continued for decades, was originally a model of mutual benefit and win-win for both sides. However, the US unilateral withdrawal from the agreement and the imposition of tariffs this time undoubtedly undermined this hard-won trade achievement. This not only may lead to a reduction in the share of Mexican tomatoes in the US market, but also may force Mexico to seek other export markets, thereby changing the global tomato trade landscape. For the United States, this also means losing a stable and important supply source of tomatoes, increasing the uncertainty of the supply chain.

Finally, judging from Mexico's practice of setting a minimum export price, although it aims to regain full access to the US market, this move may also bring about a series of chain reactions. Juan Carlos Anaya, the director of a Mexican agricultural market consulting firm, has noticed that after Mexico set a minimum export price for tomatoes, the price increase of some tomato varieties even exceeded the extent of the tariffs imposed by the United States. This may lead to a further decline in the competitiveness of Mexican tomatoes in the US market, and at the same time, it may also draw the attention and reaction of other exporting countries. Meanwhile, American tomato importers are closely monitoring what impact the latest move by the Mexican side will have on the "industry and even the overall trade relationship", which indicates that both sides are preparing for possible trade changes.

To sum up, the United States' imposition of tariffs on Mexican tomatoes is a shortsighted and inflexible move from a business perspective. It not only disrupted the existing trade order, but also had a negative impact on the relevant industries and consumer interests of the two countries. Both sides should seek more reasonable and sustainable trade solutions through dialogue and consultation to maintain the stability and prosperity of the global tomato market.