Mexico added hams and other pork products to a list of U.S. products subject to import tariffs as an escalating trade dispute threatens the second-largest foreign market for American pork producers.

“Hams, shoulders and cuts thereof” from the U.S. will be assessed a 5 percent tariff, according to a statement today from Mexico’s economic ministry. Additionally, cooked pork rinds face a 20 percent tariff, the statement said.

The pork cuts were among roughly 99 products subject to Mexican tariffs, adding about 11 items to a list Mexico originally released in March 2009, claiming the U.S. failed to live up to its North American Free Trade Agreement obligations.

Mexico imposed the tariffs after the U.S. in early 2009 canceled a pilot program that allowed Mexican truck drivers to operate north of the border.

The parties “failed to reach a mutually satisfactory solution to the dispute over cross-border transport,” according to Mexico’s statement today. The U.S. “still does not comply” with its NAFTA obligations.

Mexico also placed a 25-percent tariff on fresh cheese from the U.S. and a 15-percent tariff on sweet corn, according to the statement.

Mexico is one of the biggest foreign customers for U.S. agricultural products, particularly meat, fruits and vegetables. Last year, Mexico imported U.S. pork valued at $419.6 million, second only to the $1.46 billion shipped to Japan, according to government data.

For the first six months of this year, Mexico’s pork imports totaled $261 million, up 32 percent from the same period last year.

The National Pork Producers Council said it is “extremely disappointed” with the tariffs, and urged the U.S. to meet its NAFTA obligations.

A 5 percent tariff on hams will hurt U.S. producers’ competitive position against their counterparts in Canada, Chile and Mexico, said Nick Giordano, vice president for international affairs for the pork council. Ham cuts account for the largest share of Mexico’s pork imports from the U.S., he said.

“We’re now handing them a 5 percent advantage,” Giordano said in a phone interview. “It’s going to be difficult to sell the same amount of product” to Mexico.

It’s unclear what kind of financial impact Mexico’s tariffs will have on U.S. pork producers, Giordano said.

“The bottom line is the U.S. has to fully implement its obligations” under NAFTA, Giordano added. “The longer the U.S. takes to implement NAFTA, the more the U.S. is going to lose exports and jobs.”
Still, a rally in Chicago hog futures this week suggested limited market concern over the longer-term impact of Mexico’s tariffs.

October lean hog futures Wednesday rose 2.55 cents to 78.075 cents a pound, a two-week high. Hog futures are up almost 16 percent this year, reflecting tighter animal supplies and improved exports.
Mexico’s tariffs may have greater impact on U.S. fruit growers, who are bracing for additional financial blows after the initial tariffs hit apricots, cherries, onions, pears, peas, potatoes and strawberries.

The updated tariff list includes apples, grapefruit and oranges, while seven fruits and vegetables on the original list continue to face tariffs. Mexico assessed a 20 percent tariffs on most of those items.

NAFTA’s cross-border trucking program was derailed amid opposition from the International Brotherhood of Teamsters and its allies in Congress, the Wall Street Journal reported earlier this week.

Opponents of the program have argued that Mexican trucks are unsafe, that some drivers don't know English and that Mexican authorities don't keep adequate safety records on drivers.