On July 14, the Trump administration terminated the 2019 Tomato Suspension Agreement, a move that disrupted nearly three decades of regulatory framework governing Mexican tomato exports to the United States that began when the original agreement was signed in 1996.
The Suspension Agreement established a floor price for Mexican tomato exports, which ensured U.S. consumers had consistent access to a variety of tomatoes throughout the year.
This termination of the Tomato Suspension Agreement, initially triggered by pressure on the Department of Commerce, is set to have considerable consequences for the agricultural markets, U.S. consumers, and the broader U.S.-Mexico bilateral relationship.
The Tomato Suspension Agreement followed an antidumping investigation by the U.S. Department of Commerce after U.S. tomato growers alleged unfair pricing by Mexican producers.
The agreement, under which Mexican growers agreed to sell their products at or above minimum prices in exchange for the suspension of the investigation, was renegotiated several times—most recently in 2019.
One immediate outcome of the termination was the implementation of an antidumping duty order applying an average import duty of 17.1 percent on Mexican tomatoes, reverting back to the rate established in the 1996 investigation.
While the consumers might see a wide variety of tomatoes in their grocery stores, they are categorized under the same classification in the Harmonized Tariff Schedule of the United States, leading to a complex interplay of market dynamics following the termination.
The removal of the price floor could lead to lower tomato prices for consumers initially since Mexican exporters would not be restricted to sell tomatoes above a set minimum price.
However, it is unclear how this might ultimately affect market prices once the imports increase later in the harvest season.
The responses from different sectors of the U.S. tomato industry have been sharply polarized.
Florida tomato growers, represented by the Florida Tomato Exchange (FTE), have long opposed the agreement, arguing that it harms their pricing structure and market viability.
They contended that the previous agreements had proved ineffective in mitigating issues caused by low-priced and subsidized imports.
In contrast, U.S. growers and importers in the West, who have leveraged binational operations for years, voiced concerns about the potential spike in tomato prices for consumers if the tariffs take effect.
They noted that innovations in tomato varieties—resulting from the previous stability provided by the agreement—might face challenges moving forward.
A significant backlash against the termination emerged from over 30 organizations that signed letters urging for negotiation instead of abrupt termination, advocating for the renewal of the agreement.
Members of Congress from Western states have also echoed these concerns, stressing the risk of job losses resulting from the decision.
In Mexico, the government responded to the termination with a mix of disappointment and determination.
Mexican officials expressed their discontent, emphasizing that the proposal for negotiation was dismissed for political reasons.
Mexican President Claudia Sheinbaum pledged to continue supplying tomatoes to the U.S., underscoring the market’s reliance on Mexican exports.
In a notable response, Mexico later published an agreement supporting a new minimum export price for tomatoes, which aims to provide some stability to its producers.
The implications of this termination extend beyond pricing; they are also entwined with labor issues prevalent in the agriculture sector.
The ongoing labor shortages in U.S. agriculture, compounded by insufficient authorized workers, raise questions about domestic tomato production capabilities post-termination.
This situation is further complicated by the recent trends of U.S. immigration policy impacting seasonal agricultural workers.
Actual impacts on tomato prices in the U.S. are anticipated to manifest prominently as the market adjusts and Mexican harvests increase.
The reluctance of domestic growers to ramp up production quickly means that any declines in imports could create supply gaps that might result in rising prices.
While proponents of terminating the agreement believe this will lead to growth opportunities for U.S. production, they must contend with realities affecting labor and market dynamics.
Furthermore, the relationship between the U.S. and Mexico will likely face scrutiny in light of this decision, amidst broader commercial concerns that affect trade relations.
Analysts note that the Trump administration’s approach appears geared toward domestic politics rather than fostering cooperative international trade solutions.
As the Sheinbaum administration prepares for the review of the USMCA next year, the termination of the Tomato Suspension Agreement will surely be a focal point of continued discussions.
Both governments may seek to negotiate new agreements to restore stability in the tomato market while addressing the underlying economic and labor-related challenges.
image source from：csis
