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Mexico eyes tariffs on $4B of US corn, soybeans as retaliatory option

Mexico is considering retaliating with tariffs on $4 billion in annual imports of U.S. corn and soybeans if U.S. President Donald Trump imposes new levies on the country's products, and has been courting alternative suppliers to cushion the domestic price impact of such a move, Mexican officials told Reuters.

In early June, Mexico retaliated against Trump's decision to lift the country's temporary exemption from duties on steel and aluminum, targeting U.S. pork, apples, whiskey and steel. However, the country held back on tariffs on U.S. grains to give it bargaining room for ongoing trade talks and shield Mexican consumers from higher prices, a trade source familiar with the matter told Reuters.

Mexico imports some 14 million tonnes of U.S. corn and almost 4 million tonnes of soybeans annually, the newswire said.

"This issue is one for phase two ... Intentionally, it was left for a major crisis phase," Bosco de la Vega, head of the National Farm Council, Mexico's main agricultural lobby, told Reuters. He said tariffs on U.S. grains was discussed at a June 4 meeting with Economy Minister Ildefonso Guajardo.

Potential tariffs on grains would target the U.S. corn belt, including states such as Missouri, Kansas, Iowa and Nebraska, de la Vega said. These states voted for Trump in the 2016 presidential elections, Reuters noted.

Raul Urteaga, director of international trade for Mexico's agriculture ministry, said it was not currently aiming at U.S. grains, but did not rule out such a future action. Mexico is currently negotiating with the U.S. and Canada on revising the North American Free Trade Agreement, and is monitoring Trump's order to launch a national security investigation on U.S. imports of foreign vehicles that may lead to new tariffs.

De la Vega said Mexico's economy ministry is evaluating a broad duty-free quota to help increase imports from other suppliers and offset the higher cost of U.S. grains. He expects feed corn imports from Brazil to reach 1 million tonnes by the end of 2018 and 500,000 tonnes from Argentina.

"There's no real possibility of substituting these two products in the short term. The impact on the pork and beef industries in Mexico in terms of costs would be brutal," former Mexican deputy agriculture minister, Mariano Ruiz-Funes, told the newswire.