Mexico hits back on U.S. steel, slaps tariffs on pork, bourbon

Mexico put tariffs on American products ranging from steel to pork and bourbon on Tuesday, retaliating against import duties on metals imposed by President Donald Trump and taking aim at Republican strongholds ahead of U.S. congressional elections in November.

Mexico's response further raises trade tensions between the two countries and adds a new complication to efforts to renegotiate the NAFTA trade deal between Canada, the United States and Mexico.

American pork producers, for whom Mexico is the largest export market, were dismayed by the move.

Trump last week rattled some of the closest U.S. allies by removing an exemption to tariffs on imported steel and aluminum that his administration had granted to Mexico, Canada and the European Union.

Meanwhile, Trump advisor Larry Kudlow revived the possibility on Tuesday that the president will seek to replace the trillion dollar North American Trade Agreement (NAFTA) with bilateral deals with Canada and Mexico, a move that both countries say they oppose.

Following news of the new Mexican tariffs, which take effect immediately, the peso tumbled to its weakest level since February 2017, leading losses among major currencies.

Mexico's retaliatory list included a 20-per cent tariff on U.S. pork legs and shoulders, apples and potatoes and 20 to 25 per cent duties on types of cheeses and bourbon, the Mexican economy ministry said in the government's official gazette.

A range of U.S. steel products will be hit by 25 per cent tariffs. Mexico is a net importers of U.S. steel.

Mexico's trade negotiators designed the list, in part, to include products exported by top Republican leaders' states, including Indiana where Vice-President Mike Pence was formerly governor, according to a trade source familiar with the matter.

The retaliatory tariffs could also have political implications in some hotly contested races as the Republicans seek to maintain control of both chambers in Congress. Pork exporter Iowa, where incumbent Republican Representative Rod Blum is seen as vulnerable in November's election, is an example of a place where Trump's party could be hurt.

Top cheese producing states include California, New York and Wisconsin home to House of Representatives Speaker Paul Ryan, who is retiring from Congress. Bourbon-producing Kentucky is the home state of Senate Majority Leader Mitch McConnell, a Republican.

'Devastating' to rural America

"This is a gut punch to Virginia farmers, who exported more than $68 million in pork to Mexico last year. The President's trade war is going to cost Virginia ag jobs," U.S. Senator Mark Warner, a Democrat from Virginia, said in a tweet.

The president of the U.S. National Pork Producers Council said Mexico accounted for nearly 25 per cent of all pork shipments last year, adding that "a 20 per cent tariff eliminates our ability to compete effectively in Mexico."

"The toll on rural America from escalating trade disputes with critically important trade partners is mounting," said Jim Heimerl, the council's president and a pork producer from Johnstown, Ohio. "This is devastating to my family and pork producing families across the United States," he said in a statement.

Mexico announced its response to Trump's move last week with a focus on products from congressional districts that Trump's Republican party is fighting to retain in November. It did not provide details of tariff levels or a full list of products at the time.

The United States and Mexico do $600 billion US in annual trade and about 16 per cent of U.S. goods exports go to its southern neighbour. However, the Mexican economy relies more on trade than does the U.S. economy, with about 80 per cent of its exports sold to America.

The trade fights with Mexico and Canada are part of the Trump administration's "America First" economic agenda, an aggressive policy of seeking to set right what the president views as unfair trade balances that has also put Washington on a collision course with China over trade.