Trade war: Mexico pork tariff threats push Iowa losses to $560 million

Donnelle Eller | The Des Moines Register

Show Caption Hide Caption Why China's tariffs matter to Iowa Iowa is an agricultural powerhouse, exporting products all over the world. That’s why many are concerned about a possible trade war with China.

Iowa pork producers already dealing with a 25 percent tariff on U.S. pork exports to China could face another trade hit, with Mexico considering a 20 percent tariff on hams and pork shoulders.

Growing trade worries have cut pork prices in recent weeks, costing Iowa producers about $560 million, said Dermot Hayes, an Iowa State University economist.

Mexico is the largest export market for U.S. pork, based on volume.

Mexico bought $1.5 billion of U.S. pork last year, followed by China-Hong Kong at nearly $1.1 billion.

The tariffs are "potentially devastating news for Iowa’s pig farmers and the rural Iowa economy," said Gregg Hora, president of the Iowa Pork Producers Association.

► More: What the latest round of pork tariffs could do to your Iowa grocery bill

The state is the nation's largest pork producer, raising about 40 to 50 million animals annually.

The association said about 27 percent of all Iowa and U.S. production is exported, accounting for nearly 40 percent of an average animal's value last year.

Hora, who raises pigs near Fort Dodge, said he hopes the U.S., Canada and Mexico trade officials stop using food as a "negotiating tactic."

The added costs with the tariffs hurt consumers in China and potentially Mexico.

"We’ve worked many years, spent a lot of time and money building trade relationships to expand markets in Canada, Mexico and other key economic trading countries," Hora said.

"We’re concerned about the loss of market share we’ve built up over the years," he said, adding that he hopes U.S. trade officials "rectify this situation immediately."

► Previously: Chinese soybean tariff would hit Iowa's economy hardest, new report says

President Donald Trump announced Thursday the U.S. would implement a 25 percent tariff on steel and 10 percent tariff on aluminum imported from Mexico, Canada and the European Union.

In response, Canada said Friday it would levy tariffs on $12.8 billion in U.S. goods, including steel, aluminum and whiskey.

Europe has proposed targeting U.S. icons such as Harley-Davidson, Levi’s jeans and Kentucky bourbon. Mexico also said it would look at tariffs on steel, blueberries and other products.

The threat of pork tariffs comes during peak demand — summertime grilling.

"This should be an extremely profitable time for producers, but that's no longer the case," Hayes said.

► Related: Can U.S. agency that brought us government cheese protect farmers from tariff fallout?

The pork industry normally would look to China to buy its excess pork, "but China's now closed," he said, with its tariffs making U.S. products less competitive.

He said producers had been close to breaking even financially before the tariffs were introduced, but now they're looking at losses.

Most producers should be able to withstand the hit, with strong profits since 2014. "They're going into this with really strong balance sheets," Hayes said.

Even though the trade disruption hurts Iowa farmers, it will help consumers with increased pork supplies.

"If these duties go in place, this would be a great time to fill up your freezer with hams," he said.