- The U.S. has agreed to lift aluminum and steel tariffs on Canada and Mexico, resolving a standoff between the neighboring countries. Manufacturing costs for food and drink packaged in cans made from imported aluminum or steel increased last year when the Trump administration imposed tariffs of 25% against Canadian and Mexican steel and 10% against aluminum.
- Canada and Mexico also agreed to drop their retaliatory tariffs against a variety of products, from metals to food. About $15 billion worth of U.S. exports had been targeted under retaliatory tariffs, according to The Wall Street Journal.
- The deal removes a major hurdle that had been threatening the U.S.-Mexico-Canada Agreement's approval by Congress. The pact, which was agreed upon by the three countries last year, still needs to be ratified by lawmakers in each of the three countries.
As U.S. trade fights around the world pressure American companies, the tariff deal with Canada and Mexico is welcome news. During the last year, food companies, farmers and businesses have been pushing to lift the metal tariffs and to get Canada and Mexico to remove the duties they placed on American products in return. Mexico and Canada together account for about 30% of U.S. steel imports and nearly 40% of its aluminum imports.
In March 2018, the U.S. placed a 25% tariff on steel imports and a 10% tariff on aluminum imports, leading some U.S. producers to raise their prices. The move cut into sales for many companies. Del Monte Foods' CEO Greg Longstreet told Bloomberg last week that the U.S. is an "inflationary environment" and the tariffs drove up prices on his company’s canned fruits and vegetables.
"Tariffs impacted us immediately," he said. "Canned costs went up 25% overnight."
Geoff Freeman, president and CEO of the Grocery Manufacturers Association, said in a statement emailed to Food Dive that implementing unnecessary tariffs on two of the U.S.'s "closest trading partners is bad policy."
“Many of the essential products American consumers depend on every day require aluminum and steel – from aerosol cans to candy wrappers – and these tariffs create a burden that hurts manufacturers and consumers alike,” Freeman said.
Last year, U.S. soda and beer manufacturers using imported aluminum — including Dr Pepper Snapple, PepsiCo, Coca-Cola, Constellation Brands, Molson Coors and Heineken — said in a letter to President Trump that manufacturing costs were likely to dramatically increase if the tariffs were imposed. They estimated a 20% import duty would cost them $512.5 million and a 30% one would amount to $768.8 million.
Katherine Lugar, president and CEO of American Beverage Association, told Food Dive in an email that the announcement was a positive for the beverage industry.
"Our industry employs approximately 253,000 hard-working Americans, contributes $182 billion in direct economic impact and provides $19.8 billion in wages and benefits," Lugar said. "Lifting these tariffs bolsters our industry, allowing us to create more jobs, drive innovation, serve customers and give back to our communities."
The retaliatory tariffs from Mexico and Canada also have put strain on other U.S. food industries in the last year. David Herring, a pork producer from North Carolina and president of the National Pork Producers Council, said in a statement that Mexico's 20% retaliatory tariff on U.S. pork has cost producers $1.5 billion on an annualized, industry-wide basis.
Although eliminating these tariffs is a financial win for the food and beverage industry, trade in the U.S. is still volatile. And as long as other disagreements remain, food companies will be impacted by how long the skirmishes last and how they are resolved. Among the most high profile one is the trade war between China and the U.S. If U.S. companies have to pay more to import commodities, those costs will most likely be passed on to shoppers and sales will suffer as a result.
Manufacturers and producers have struggled in the last year as trade disputes with China, Mexico, Canada and the EU have ramped up. Earnings reports have been negatively impacted by tariffs and there continues to be concerns about the financial hit that trade disputes can bring. As trade continues to be a big issue for the White House, food and beverage companies will be keeping a close watch to how the complicated and fast-moving issue is ultimately resolved.