Mexico Imposes 50% Tariff on White Corn Imports Due to Trade Dispute with U.S. and Canada

tendata blogTrade Trends News

ten data blog26-06-2023

Corn is a staple in the Mexican diet and an important source of calories, with an annual per capita consumption of 332 kg. Mexico will produce nearly 23 million tons of white corn in 2022. The vast majority of corn is consumed locally, with only a small portion exported. Mexico is self-sufficient in white corn, but highly dependent on imports of yellow corn, which is used primarily for livestock feed and purchased almost entirely from the United States.

Mexican President Andrés Manuel López Ovrador has announced his intention to implement tariffs and avoid imports of white corn. In addition, the government will continue to crack down on genetically modified (GMO) foods in an open trade dispute with the United States and Canada. The new tariffs will apply to imports of grains from countries with which Mexico does not have trade agreements.

The Mexican government imposed a 50 percent tariff on white corn exports in January to depress tortilla prices and preserve the country's grain, and subsequently imposed import restrictions.

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Import Restrictions

Mexico began imposing a 50 percent tariff on white corn imports on June 24, a move the president said was aimed at boosting the country's production and preventing imports of genetically modified corn.

The measure, announced in the Mexican government's official gazette on the evening of June 23, will remain in effect until the end of the year and was implemented against the backdrop of a trade dispute between Mexico and its North American trading partners, Canada and the United States, over genetically modified corn.

White corn is one of the basic foodstuffs that the Mexican government exempted from tariffs earlier this year to control inflation. But according to the decree, the decision "did not have a significant impact on the national market price decline, so it is considered appropriate to cancel the decision.

Mexico imports some white corn, mainly from the United States and South Africa. But because the tariffs violate the U.S.-Mexico-Canada Free Trade Agreement, this could complicate the country's trade dispute with the U.S. and Canada over the existence of genetically modified corn.

Mexico wants to limit human consumption of genetically modified white corn and eventually veto genetically modified yellow corn for animal feed. The U.S. and Canada say this would hurt trade in the region.

Mexico has been importing genetically modified feed corn from the United States for years, with imports worth about $3 billion a year.

U.S. and Canada defend GMOs

In 2020, Ovrador announced that Mexico would phase out genetically modified corn by 2024.

If implemented, the ban would hinder U.S. corn exports to China. According to the U.S. Department of Agriculture, U.S. corn exports totaled $4.92 billion in 2022, the second largest market for the United States last year. Currently, more than 90 percent of U.S. corn acreage is planted with genetically modified seeds.

This month, Canada said it would join a U.S. panel in a trade dispute over Mexico's proposed restrictions on imports of genetically modified corn. After negotiations with the Mexican government failed to produce results, the U.S. government requested that the dispute process be formally launched on June 2. The panel will have about six months to study the complaint and issue its findings. Mexico could be subject to trade sanctions if it is found to have violated the U.S.-Mexico-Canada Free Trade Agreement.

Both the United States and Canada said Mexico's concerns about the dangers of genetically modified corn "have no scientific basis.

President Andrés Manuel Lopez Obrador said he was not afraid of controversy and insisted that only domestically produced white corn could be used for human consumption.

Protectionist moves fail to achieve goals

This is the third time since October that the Mexican government has intervened directly in the tortilla market, when the country temporarily halted all white corn exports in coordination with most of Mexico's major food-producing countries.

The country's goal at the time was a 3 percent reduction in corn prices between October 2022 and February 2023.

However, according to data from the National Information and Market Integration System, the average price of corn was 22.22 Mexican pesos ($1.29) per kilogram at the end of February, compared to 21.72 Mexican pesos ($1.26) at the beginning of October, falling short of the government's target.

The current price is 22.7 Mexican pesos ($1.32), and new import tariffs could reduce the supply of corn and further push up prices.

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