The successful renegotiation of the North American Free Trade Agreement could turn out to be a hollow victory for some of the largest U.S. cheese companies if the Trump administration doesn’t pull back its steel and aluminum tariffs on Mexico.

The U.S. hit Mexico with tariffs on steel and aluminum on May 31 and Mexico struck back quickly, levying import taxes on U.S. cheese, pork, potatoes, apples and other commodities. The tariffs started out as 10-15 percent import taxes on June 5 and then rose to 20-25 percent on July 5.

The Trump administration made it clear that the “section 232” metal tariffs were being used as leverage in the NAFTA negotiations, so expectations were high that they would be lifted upon conclusion of the talks. But that hasn’t happened and leaders of some of the biggest U.S. cheese companies say they are losing patience because their sales are falling sharply.

“The NAFTA reset was a success story for dairy,” said David Ahlem, CEO of the Hilmar Cheese Company, who took part in a panel discussion on the issue Wednesday in Washington, D.C. “There were elements that needed to be modernized … but we’re not yet ready to celebrate … because as long as the (U.S. and Mexican) tariffs are in place, we can’t enjoy the benefits of having a modernized NAFTA and be back to where we were … Mexico is essentially closed to our cheeses.”

Ahlem lamented that his customers in Mexico are turning to Europe and elsewhere to get their cheese.

Last year the U.S. exported 97,000 metric tons of cheese to Mexico, accounting for 28 percent of total U.S. cheese exports. U.S.-made cheese accounted for 12 percent of all cheese consumed in Mexico in 2017.

Jim Sartori, CEO of Sartori Cheese, said his company is still exporting to Mexico, but it has had to absorb the 25 percent tariff.

Ahlem, Sartori, Stan Ryan, President and CEO of Darigold, and others are in Washington this week to meet with lawmakers and Trump administration officials including USDA Secretary Sonny Perdue.

Sartori told Agri-Pulse that he and others were surprised when President Trump did not lift the metal tariffs on Mexico and that he and others are lobbying hard to make that happen.

“We want the 25 percent tariffs lifted off the dairy products going into Mexico,” said International Dairy Foods Association (IDFA) President and CEO Michael Dykes. “We’ll leave it up to Secretary of Commerce Wilbur Ross and President Trump and the Mexicans to figure out how they’ll do steel and aluminum, but we want the tariffs lifted on (dairy).”

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Trump told reporters Monday that he has no intention of lifting the steel and aluminum tariffs on either Mexico or Canada just because NAFTA – now renamed the United States-Mexico-Canada Agreement (USMCA) – has been renegotiated. He also said he was considering demanding that Mexico agree to some form of a quota for steel exports to the U.S.

Regardless, as long as the tariffs are in place, cheese makers are worse off than they were before negotiations to write NAFTA began, Dykes said.

“The (steel and aluminum tariffs) took a duty-free market and made it a 25 percent-tariff market,” he said. “Even if the USMCA gets ratified tomorrow, we’re not back to where we were pre-negotiation a year and a half ago. We had duty-free access then.”

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