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November 16, 2016

Nestle plays down concern over Trump-led US imposing duties on Mexico

Nestle has played down the impact any future move from the US to impose duties on products made in Mexico and sold in the north of the boarder would have on its business.

Nestle has downplayed the impact any future move from the US to impose duties on products made in Mexico and sold in the north of the boarder would have on its business. 

The election of Donald Trump as US President has raised the possibility the US could clamp down on free trade between the country and Mexico. During his election campaign, Trump was highly critical of the North American Free Trade Agreement which establishes free trade between the US, Mexico and Canada. In the final televised presidential debate, Trump described NAFTA as “the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country”.

Speaking to Bloomberg on the sidelines of the Mexico Business Summit in Puebla earlier this week, Marcelo Melchior, the head of Nestle’s business in the country, suggested that, should the US impose tariffs on Mexican-made products, the company would re-evaluate its North American supply chain. “If they place a tariff, and it’s no longer competitive to export to the US, I won’t export to the US or I’ll find another type of product that I can export to the US,” Melchior said. 

A spokesperson for Nestle, however, told just-food the Swiss food giant has not altered its strategy in the region and is pushing ahead with plans to invest a total of US$1bn in Mexico by 2018. 

The investment proposal was first unveiled in 2014. At the time, Nestle said the cash would be spend on a new infant nutrition factory in Ocotlán, in Jalisco state, which it opened last month. The investment was also geared towards a petfood factory in the city of Silao, in the state of Guanajuato and the expansion of its cereal factory in Lagos de Moreno in Jalisco. 

“Nestle Mexico has not changed its investment plans. Our US$1bn commitment has advanced to EUR807m to date and we will meet the target as planned by 2018,” the spokesperson said. “The exports to US are a minimal part of our total production and it is way too early to consider any changes as we need to see what changes occur to trade regulations.”

Nestle is not the only company food company that would potentially be impacted by the introduction of tariffs on food products made in Mexico. 

Last year, Mondelez International decided to move some of its biscuit production out of Chicago and into Mexico. The company pumped $130m into a factory in Salinas, Mexico, in a bid to “modernise” its North America supply chain.

The US snack maker did not respond immediately to requests for comment. 

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