By Bheom Seok Kim and Xi He

  • Bheom Seok Kim is a Ph.D. candidate with research interests in international trade and development, environmental and natural resource economics, and food and health economics.
  • Xi He is an assistant professor at Virginia Tech. Her research focuses on agricultural economics and food policy evaluation.

Summary

On July 14, 2025, the U.S. government imposed a 17.09 percent tariff on fresh tomatoes imported from Mexico and terminated the nearly three-decade-long Tomato Suspension Agreement, signaling a major shift in tomato trade policy and raising concerns about the effects on U.S. producers and consumer prices. Since 1990, domestic production has declined while imports, especially from Mexico, have surged, with tomatoes becoming the highest-value imported vegetable and imports doubling domestic production volumes by 2024. These trends have fueled debates over the competitiveness of U.S. growers, particularly in Florida, and set the stage for renewed trade actions after the USITC found in 2019 that Mexican imports threatened material injury. With the immediate effects of the new tariffs still uncertain, the article reviews the evolution of U.S.–Mexico tomato trade policy, recent pricing patterns, and the key factors that will shape how these 2025 tariffs influence consumer prices and domestic production.

Introduction

On July 14, 2025, the U.S. government imposed a 17.09 percent tariff on fresh tomatoes imported from Mexico and terminated the nearly three-decade-long Tomato Suspension Agreement (TSA) (U.S. Department of Commerce, 2025). This regulation regime change sparks debates about potential impacts on U.S. tomato producers and grocery price increases. Unlike most agricultural products from Mexico that remain exempt from tariffs and other trade measures under the United States, Mexico, and Canada Agreement (USMCA), tomatoes have long been an exception, reflecting persistent trade frictions and structural changes in North American produce markets.

Over the past three decades, the U.S. fresh produce industry has undergone a profound transformation marked by declining domestic production and rising import dependence, particularly from Mexico (USDA ERS, 2023). The shift has been striking: in 2024, imports accounted for 46.8 percent of total U.S. fruit supply and 36.3 percent of vegetable supply, up from 11.5 percent and 9.7 percent, respectively, in 1990 (USDA ERS, 2025). This structural dependence on imports has been especially pronounced for certain crops, including tomatoes, cucumbers, squash, and berries. Tomatoes, the highest-value imported vegetable, illustrate this long-term pattern clearly. In 1990, U.S. tomato production was nearly three times the volume of imports; by 2024, imports had grown to twice the size of domestic production (Figure 1).

Figure 1. U.S. Production and Imports of Fresh Tomatoes, 1990–2024.

U.S. Production and Imports of Fresh Tomatoes, 1990–2024.
Source: Data from USDA Vegetables and Pulses Yearbook tables (USDA ERS, 2025).

This rapid import expansion has fueled longstanding debate about the competitiveness and sustainability of U.S. tomato production. For regions such as Florida, lower import prices have placed downward pressure on grower revenues and challenged the viability of labor-intensive domestic operations. In 2019, the U.S. International Trade Commission (USITC) concluded that Mexican tomato imports threatened material injury to the domestic industry, setting the stage for the renewed trade actions in 2025 (U.S. International Trade Commission, 2019).

While the immediate impacts of the tariffs remain uncertain, understanding the broader context of tomato trade policy and the potential price effects is critical. This article reviews the evolution of U.S.–Mexico tomato trade policy, examines tomato prices across the supply chain, and discusses key factors that will determine how these tariffs affect consumer prices and domestic production.
Background on Tomato Trade Policy

Figure 2 provides a timeline of key policy developments for the U.S.–Mexico tomato trade, which has been governed by a series of suspension agreements since 1996, when U.S. producers filed an antidumping petition alleging that Mexican exporters were selling tomatoes below fair market value. 

Instead of imposing tariffs on imports that are being sold below fair value (dumped), the Department of Commerce suspended the investigation and reached a settlement with Mexican exporters that established a minimum reference price of 21.08 cents per pound, preventing sales below that threshold. The agreement was subsequently revised multiple times, in 2002, 2008, 2013, and 2019, to reflect evolving market conditions and production methods (U.S. Department of Commerce, International Trade Administration, 1996–2025). Key milestones include:

  • 1998 Revision: Introduced seasonal reference prices of 21.08 cents per pound for winter tomatoes and 17.2 cents per pound for summer.
  • 2008 and 2013 Revisions: Expanded price categories by tomato type (Round, Roma, Specialty) and production system (open-field versus greenhouse). By 2013, reference prices ranged from 25 cents per pound for open-field summer tomatoes to 59 cents per pound for winter specialty packs.
  • 2019 Agreement: Added separate prices for organic and conventional tomatoes and required USDA Agricultural Marketing Service (AMS) inspections for all Mexican shipments. The TSA effectively evolved into a comprehensive regulatory system linking pricing, documentation, and quality verification before market entry.

Figure 2. Evolution of U.S.-Mexico Tomato Trade Policies, 1996–2025.

Figure 2. Evolution of U.S.-Mexico Tomato Trade Policies, 1996–2025.
Source: Compiled by authors from various Federal Register notices (U.S. Department of Commerce, 1996-2025).

In April 2025, the Department of Commerce announced its intent to terminate the 2019 TSA following the USITC's determination that Mexican imports continued to threaten injury to U.S. producers. On July 14, 2025, the agreement was officially terminated, and antidumping duties were imposed. The tariff rates varied by exporter: 2.81 percent for San Vicente Camalú, 18.58 percent for Administradora Hortícola del Tamazula, 17.09 percent for most other exporters, and 273.43 percent for non-cooperating firms. U.S. Customs and Border Protection began collecting these duties on all imports effective July 14, 2025. The termination marked a fundamental policy shift from a managed trade regime that emphasized price floors and inspections to a tariff-based protection system with potentially broader implications for prices throughout the supply chain.

Potential Price Impact of the 2025 Tariffs

To gauge possible impacts on prices, it is useful to examine recent pricing patterns along the supply chain. Figure 3 presents weekly price data for round tomatoes, the dominant variety in U.S. retail sales, at three key stages: the shipping point in Orlando (Oviedo), Florida; the terminal wholesale market in Miami; and retail outlets across the Southeast from 2015 through 2025. Several notable patterns emerge. First, tomato prices show similar seasonal patterns, with prices typically higher in summer months when production costs increase. Second, despite a 50 percent increase in the overall Consumer Price Index (CPI) and roughly 60 percent growth in the Producer Price Index (PPI) during this period, nominal tomato prices have remained relatively flat across all market stages. This stability suggests that imports have played an important role in restraining price increases for both producers and consumers. Finally, retail prices consistently exceed wholesale prices, which in turn exceed shipping point prices, reflecting the standard markup structure along the supply chain. 

Figure 3. Round Tomato Prices Across the Supply Chain in Florida, 2015–2025.

Source: USDA Agricultural Marketing Services (USDA AMS, 2025). Note: Dates are indicated with the year and month.
Source: USDA Agricultural Marketing Services (USDA AMS, 2025). Note: Dates are indicated with the year and month.

The introduction of the 17.09 percent tariff could disrupt this equilibrium. Its ultimate impact will depend on how the additional costs are distributed across the supply chain, including Mexican exporters, U.S. importers, wholesalers, and retailers. The tariff incidence hinges on market fundamentals that determine each party's ability to avoid bearing the cost. At the most basic level, pass-through depends on the availability of substitutes—yet with Mexico supplying 90 percent of U.S. imports through specialized year-round production systems, comparable alternatives remain limited. The speed and extent of pass-through also depends on existing market structures. Long-term procurement contracts may temporarily shield consumers from price increases, but as these contracts expire, the bargaining power between suppliers and buyers becomes crucial. Large importers or retail chains can pressure Mexican exporters to absorb portions of the tariff, while smaller importers with less leverage face higher costs. Consumer price sensitivity also determines the upper bound of feasible pass-through—retailers need to balance the risk of reduced sales against margin compression. 

Early projections of the tariff's impact show considerable variation. Academic estimates suggest a 10 percent price increase for fresh tomatoes (Chen, 2025), while industry analysts project increases as high as 50 percent (Galeana, 2025). The wide range reflects uncertainty over the degree of tariff pass-through in vertically organized food supply chains, where wholesale and retail margins can absorb or amplify shocks depending on competitive conditions and inventory management practices.

The magnitude and timing of price effects will also differ by product type. While fresh, whole tomatoes imported directly from Mexico to be consumed whole, chopped, or sliced face the tariffs exposure, processing tomatoes, which companies use for making tomato paste, canned or stewed tomatoes, and tomato sauce are exempt and not directly affected. However, these products may experience indirect effects. If fresh tomato prices rise significantly, processors might compete more aggressively for processing tomatoes, potentially driving up their prices. Conversely, Mexican fresh tomatoes diverted from the U.S. market could increase processing supply, potentially lowering prices for processing products.

The longer-term price impacts will also depend critically on supply-side responses. In the short term, U.S. growers, particularly in Florida, may benefit from higher prices and improved margins. However, expanding domestic production faces significant structural constraints: high labor costs, limited seasonal workers, water and land availability, and competition from alternative crops. Mexico retains substantial comparative advantages in labor, greenhouse technology, and year-round production capacity. Without major investments in mechanization or protected agriculture, U.S. producers may struggle to fill the supply gap, and tomatoes' perishability limits storage options.

Meanwhile, wholesalers and retailers will adjust sourcing strategies and renegotiate supply contracts. As this policy unfolds over the coming year, whether the tariff leads to sustained price increases or whether market adaptation mitigates retail price impacts will ultimately depend on how these supply-side adjustments evolve, offering important lessons about the costs and benefits of protectionism in perishable produce markets.

References

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The Campus to Commonwealth (CC) article series highlights the Virginia Tech Department of Agricultural and Applied Economics' mission in generating and sharing knowledge in applied economics and agribusiness principles that help address the food, financial, health, development, policy, environmental, and social needs in Virginia and beyond.

John Bovay is the managing editor and Melissa Vidmar is the production editor.