Which Foods Could Become Pricier After Commerce Department's New Tomato Tariffs?

The Commerce Department announced this week the termination of a longstanding agreement with Mexican tomato producers implemented to prevent artificially low tomato prices. Now that the agreement is no longer in effect, the Commerce Department has the authority to impose tariffs on tomatoes imported from Mexico and can resume a dormant anti-dumping investigation into Mexican producers' allegedly unfair trade practices.

An analysis from Arizona State University projects that consumer prices for tomatoes could rise 40 percent to 85 percent as a result of reduced supply from Mexico. Customs and Border Protection, which is charged with assessing duties on goods entering the United States, could start charging a 17.5 percent tax on tomato imports as soon as the Commerce Department gives them the go-ahead.

"The Department of Commerce remains committed to ensuring that American domestic industries are protected from unfair trading practices," Secretary of Commerce Wilbur Ross said in a statement. "We remain optimistic that there will be a negotiated solution."

Darren Seifer, food and beverage industry analyst for The NPD Group, explained that the effects of tariffs "could be pretty far reaching."

"Consumers are always trying to keep their grocery spending in check," he told Newsweek. "Historically speaking, when we look at the percentage of our disposable income that goes toward food and beverages, that's only 10 percent. Consumers aren't willing to hand over more money for things they get all the time."

Seifer highlighted related produce—items like ketchup and sauces—that consumers might turn to if tomato prices become out of reach.

"I don't see consumers just absorbing the prices. I see them adopting options that keep their spending in check," he said.

Purveyors of fresh food may also feel the squeeze. Whether it's a pizza joint or an Italian restaurant – "or any place that has a salad," according to Seifer—tariffs may start to cause upward pressure on prices.

The Suspension Agreement on Fresh Tomatoes was first implemented during the Clinton presidency and retooled several times over the following decades. As part of the pact, the Commerce Department agreed to drop its probe into Mexico's alleged dumping of fresh tomatoes into the United States if Mexican producers modified their prices so domestic producers could compete.

According to a study from the University of Florida, Mexican tomato imports accounted for 90 percent of all tomatoes imported into the United States in 2015. The prices of Mexican tomatoes accordingly have a sizeable impact on the tomato market in the United States. Two decades ago, tomatoes imported from Mexico numbered fewer than the amount of tomatoes produced in Florida, a key state for domestic production. In 2015, the amount of tomatoes imported from Mexico was more than three times as large as Florida production. Domestic producers have taken notice of this inversion.

The Florida Tomato Exchange, which lobbied the Commerce Department to suspend the agreement, told Newsweek that American tomato growers have "presided over a very difficult five-year period for the U.S. tomato industry."

"We are pleased that the Commerce Department has terminated the tomato suspension agreement," the exchange's Executive Vice President Michael Schadler said in a written statement. "Although the agreement was created with good intentions, it was never effective in protecting American producers from dumped Mexican tomatoes."

The Fresh Produce Association of the Americas, a trade group representing companies that import Mexican produce, vehemently opposed the Commerce Department's decision, which was initially announced in February and took effect this week.

"The tomato industry is healthy today because of the pioneering U.S. companies that import produce from Mexico," the association said in a statement on its website. "Despite the fact that the agreement has been terminated, our hope is that Commerce continues to work in good faith with the growers in Mexico to negotiate a new agreement that balances concerns of growers in Florida with the need to protect our robust trading relationship."

President Trump is currently embroiled in an escalating trade war with China. His administration has imposed 10 percent tariffs on a broad selection of Chinese goods and has threatened to increase the penalty to 25 percent in the coming days if the two countries cannot reach a wider trade agreement. After a recent impasse in negotiations, the president threatened to hit an additional $325 billion worth of Chinese goods with new tariffs.

Which Foods Could Become Pricier After Commerce Department's New Tomato Tariffs? | U.S.