US Buyers ask Guatemala exporters to absorb the new 10% tariff

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April 4, 2025April 4, 2025By Mario Vásquez
US Buyers ask Guatemala exporters to absorb the new 10% tariff

Buyers began asking for exporters to absorb 10% tariff to import the United States, but AGEXport warns that Guatemala does not have the ability to absorb all additional load.

The sectors refer that there is uncertainty both from the exporter and the importer due to the effects they will have on the products sent from Guatemala the new 10% tariffs that the United States is imposing.

In this regard Fanny D Estrada, director of Institutional Relations of the Guatemalan Association of Exporters (AGEXPORT), indicated that what happens in these four days after the announcement of the US authorities should be observed since importers and exporters do not yet know exactly how that collection will be and who will absorb it and which has generated much uncertainty on both sides.

There are cases in which importers who had orders to Guatemala have declared them on Thursday that they are left in suspense until they understand who will absorb that cost of 10% tariff, and other importers have commented that they do not want to transfer that cost to the consumer, because he does not want to lose buyers, the executive explained.

“The consumer in the United States is already quite worried because inflation has uploaded a lot in their country,” “we are at a time when apart from the general uncertainty and we are entering a very specific uncertainty of product by product,” added D Estrada.

Other associates exposed them that some importers have indicated that the load is divided absorbing 5% each.

“Guatemala is not in the possibility of absorbing 10% more, because the limit of our competitiveness is quite punished for many reasons known as the very high guys in logistics, delays, complications in many procedures, rise in costs of raw materials,” warned the agexport executive

It should also be taken into account that Mexico, one of the main competitors of the country, would not have that surcharge because what is known so far is that the preferential tariffs of the FTA that include that country, the United States and Canada, are maintained, and in that context it has a competitive advantage is difficult, the directive said.

On the contrary, there are other countries to which they are carrying tariffs of 25% or 30%, with these it seems to be for suddenly an opportunity to take advantage, but as long as Guatemala maintains and improves their competitiveness, according to the association.

Who absorbs the cost?

The Agro Chamber of Guatemala (Camagro) warned that the new tariffs will affect the competitiveness of the export sector and put jobs at risk and discourage the investment and asked the authorities to use diplomatic and commercial channels to ensure that the commitments assumed within the framework of the DR-CAFTA are respected.

Consulted, Carla Caballeros, executive director of Camagro said that apart from Mexico would have more windows because it would be with zero tariff for most products, if any other competitor country in the region negotiates before Guatemala, manages to be excluded from the changes and returns to zero tariff, competitiveness will also be lost.

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As announced by the import cost in the United States, it will be 10% more expensive, and the problem is that in the most relevant export sectors such as agriculture (bananas, coffee, sugar, fruits and vegetables and vegetables) and costumes and textiles, exporting companies are not those who put sales prices, so it is not as simple as saying that 10% will be transferred from the importer or the consumer.

Regarding who would assume the impact, the executive of Camagro explained that a characteristic of many supply chains is that international importers or buyers transfer that additional cost (in this case of 10%) to the exporter or producer of the country of origin.

In the case of Guatemala, although most contracts are in FOB modality (-Free on Board- in which the seller is in charge of transportation, insurance and merchandise security until it is uploaded to the ship), in the same way the cost is transferred to exporters as part of the export sale price.

Vegetable sector: They will practically get Guatemala out of the market

Tulio García, Executive Director of Cooperativa Cuatro, said that a meeting of several sectors with the Guatemalan ambassador to Washington, Hugo Beteta, and the Minister of Economy, Gabriela García, is scheduled to address the issue, and considers that the corresponding instances and commercial and legal tools must be exhausted.

The exporter confirmed what AGEXPORT, and indicated that “the big problem is that we cannot directly transfer the additional cost of that 10% taxes directly, because Mexico would stay with everything market since it would be 10% cheaper than all of us.”

Therefore, they should work hard to define actions, among these the way to reduce costs to mitigate the impact of 10% tariffs since for the exporter it is a great challenge to absorb that position but believes that they could not leave that load to importers either.

“We are already receiving customer calls asking what our position is. We for now keep the current prices until we define what options we have to mitigate”

He said that production costs would have to lower costs, in addition to negotiating a lot and dialogue with the corresponding authorities and that business facilitation allows them to work.

The vegetable and vegetable sector makes important shipments of broccoli, ejotes, Chinese peas, and there is also the fruit sector.

In the agricultural case, competitiveness will be lost to Mexico because it provides many of these crops, he said.

He mentioned as an example that the annual average price of a box of 10 pounds of Chinese pea produced in Guatemala, in the United States could be around US $ 10 or US $ 12. He points out that with that price it is already difficult to compete with Mexican production, which can sell between US $ 7 to US $ 9.

Now Guatemala’s product will have the additional load of 10%, and buyers of the wholesale market are governed by prices.

In the case of Ejotes, he said that they are sold to an annual average of between US $ 7 to US $ 8 for the 5 pound box. In this case Mexico have different presentations and because it produces on a large scale it has the ability to sell to US $ 0.60 to Libra (about US $ 3). In Guatemala as the production is on a small scale it is somewhat less efficient, but they focus on greater quality, however with the additional 10% “they will take us out of the market,” added the García Executive.

“With this 10% it would be practically outside the Guatemala market, you will have to make necessary adjustments to be able to keep us in business, it is not easy, I see it complicated,” he added.

“The risk for Guatemala agriculture with that 10% increase is very high and that the market can be dramatically reduced,” said the manager.

Amador Carballido, general director of AGEXPORT comments that, the expectation that many had not to appear on the list finally became an almost world list. However, he explained that he is still aware that he announce the technical standard for its implementation.

Three moments, including negotiation

The agexport manager explained there are three moments for the application of the tariff: the first is the load on the way. This burden was negotiated to certain terms and as that 10% is entering that Guatemala is applying, depending on the agreement, contract or arrangement that is with the buyer in the United States may or may not transfer 10%. This phase will last days.

The second moment is that the loads that arrive the following weeks will be negotiating, and it is believed that this 10% will be loaded to the cost that will be transferred to the buyer.

And there could be a third moment, which expect it to arrive, and refers to being able to negotiate through the corresponding authorities, so they expect those rates to be reduced or disappear. Carballido is from the criterion that the country’s path does not go see whether or not the FTA was violated, but the road is to go and negotiate the elements that have imposed and the tariff barriers.

Regarding the demand, according to Carballido, two things could happen, one that is more inflation in the United States derived from the products that are entering that country is going to become more expensive, and the second aspect is that depending on the product, a possible reduction of purchases can occur. However, it will be necessary to review in some markets where it may become opportunity and not threat.

Product impact according to “trade deviation” and the advantage of Mexico

Enrique LACS, former Minister of Economy, and Hugo Maul, analyst at the National Economic Research Center (one hundred) report that an important factor is that sectors and companies must analyze each product, to establish the strategies that allow them to maintain or take advantage of opportunities in the United States market.

The strategies will depend on the profitability and productivity that it has compared to suppliers from other countries, they said.

In this case they also coincide with the impact that the country may have because a competitor like Mexico maintains the preferential tariffs of the FTA with the United States. They consider that they can earn more market, but you must see if they have the ability to cover all that demand.

Another reading to be analyzed explains LACS, is the so -called “trade deviation” for which both the former minister and Maul explain examples of some products:

Guatemala is a high banana supplier, and US companies are going to pay 10% tariff when they buy that product, but to other countries that are competitors in this product such as Brazil, Ecuador, it was also imposed at the same rate, so there would be no distortion of the Guatemalan product in the United States because competitors will be on equal terms with this new tariff. Although Mexico’s effect must be analyzed in Banano, in addition that in other agricultural products such as tomato there is a large production and export center in Coahuila.

In the case of costumes and textiles, LACS mentions that the tariff rate for the imported from Guatemala would also be 10%, and some competitors such as India will have 26%; China, 34%; Bangladesh, 37%; and Vietnam 46%. So it would be observed here that it begins to be an opportunity for Guatemala because their products will pay less tariff.

Meanwhile, Maul indicates three aspects: in this sector there is also Mexican competition, among others, with a large cluster, and it must also be observed whether the Asian countries even with the highest tariffs would be cheaper to produce than Guatemala, taking into account that these countries register minor costs.

And, the relocation of Nicaragua factories in the other countries of Central America derived from imposeding 18% of tariff.

“The trade deviation would be given from the countries that are being put more tariffs on those who have the least tariffs,” and some sectors in Guatemala could begin to have more orders or foreign companies could be located in the country to take advantage of that option, according to LACS.

Maul adds that there is also concern about the uncertainty that if the changes in the rules of the game have already ended and those tariffs will be permanent or there will be more changes, because if they continue to be modified it is facing the impossibility of predicting the future and would affect the investment, production and world trade.

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