Mexican TVs and Pork Poised to Benefit From U.S.-China Trade War

Updated on
  • Mexico could step in to supply both sides if tariffs enacted
  • Pork producers lobbying government for agreement with China

Will There Be a Trade War?

The surprise winners of a trade spat between the U.S. and China might turn out to be Mexican producers of pork and flat-screen televisions.

Mexico, it turns out, is the largest exporter of flat-screen TVs to the U.S., which is among the thousands of Chinese products targeted by President Donald Trump’s proposed tariffs. At the same time, Mexican farmers may be able to jump in as consumers in China -- the world’s largest market for pork -- face the prospect of pricier U.S. meat.

Mexico’s potential fortune illustrates the far-reaching -- and unintended -- consequences stemming from the budding trade war between the world’s two largest economies. Trump has railed against U.S. trade deficits with both nations, but Mexico still has the advantage of favored status under Nafta -- at least for now.

U.S. consumers bought $6.5 billion worth of screens from its southern neighbor last year, ahead of China’s $3.9 billion. If the tariffs are enacted, Mexico’s share of the market could grow quickly while China’s shrinks, Bloomberg Intelligence analyst Caitlin Webber said.

“Mexican factories are already benefiting from Nafta and saving a 3.9 percent tariff on their U.S. sales,” Webber said. “They could see a further competitive boost if their Chinese competitors are potentially going to be 25 percent more expensive.”

One company in particular, Vizio Inc., could get a lift. The high-definition TV manufacturer, based in Irvine, California, moved its manufacturing hub to Tijuana, Mexico, from Taiwan in 2015. Vizio sells most of its TVs in retailers like Walmart, Sam’s Club and Costco.

Nafta Optimism

Mounting optimism that companies like Vizio will be able to continue operate under Nafta has sparked the peso’s advance toward 18 pesos per dollar, a level not seen since September of last year.

Trump’s China Trade Focus Brings Mexico Stock Investors Respite

On the other side of the spat is pork. China is among the largest foreign buyers of U.S. pork and is a key destination for cuts including feet and ears that aren’t in big demand elsewhere. China has already issued a 25 percent tariff on U.S. pork imports that took effect Monday.

Mexico may benefit from this -- if the governments can reach an agreement. China currently receives some cuts of Mexican pork, but not products such as entrails.

‘Great Opportunity’

“There’s a great opportunity in the Chinese market for Mexico,” Alejandro Ramirez, head of Mexico’s association of pork producers, said in a phone interview. “We’re asking our government to help us open up more export plants and to negotiate a permit so we can export entrails too.”

The permit would have to be negotiated between the nations’ governments, Ramirez said. Out of Mexico’s pork exports, only about 1.1 percent goes to China, he said, but there’s huge growth potential, especially if U.S. supplies become more expensive.

To be sure, the U.S. and China have indicated they’re willing to negotiate, so there’s a chance the promised tariffs never materialize. But Mexican producers should still prepare, Ramirez said.

“If we’re given the opportunity, there’s a big space in that market we can cover,” Ramirez said.

— With assistance by Megan Durisin

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