Tuesday, September 11, 2018

Trump Tariffs Take Hold in Mexico and That's Good for Chile

John, a former student of mine who has now lived in Mexico City for years, emailed me about a personal effect of tariffs. In response to Donald Trump's trade war, Mexico imposed tariffs on apples. Mexico's choices of tariffs were specifically aimed at conservative rural America where Trump support was highest.

John noticed how the price of the Washington apples he normally bought had shot up. Turns out, though, that Mexico also has a free trade agreement with Chile. Chilean apples were cheaper, so for the first time ever he bought them.

But the story doesn't quite end there, because some Chilean apples were Del Monte, whereas others were Frusan, a Chilean company. So if you bought red, you were supporting Chilean growers and a U.S. company, and with yellow you were supporting only Chile.

U.S. growers lose in all scenarios, as then of course do the workers. Mexico is the top export destination for U.S. apples, so the 20% tariff hurts a lot. It is not yet clear whether the tentative new agreement fixes that. The only bright side for the industry is that the 2018 pre-tariff exports were higher than normal so they had a cushion. Growers are still concerned:

“The apple harvest is just kicking off across America and that’s normally a season of enthusiasm,” U.S. Apple president and CEO Jim Bair said in the release. “But this year the impact of disputes with Mexico, India, Canada and China, our No. 1, 2, 3 and 6 export markets, will be felt deeply across the industry. Our growers want Congress to know the damage being caused in their jurisdictions by these trade disputes.”
This is a nice boost for Chile, which to this point barely registered in the Mexican apple market. Chile exports apples all over the world (India is its largest market) and I would imagine that a new market is entirely welcome.


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