Nogales Adapts After Tomato Agreement Ends

Arizona’s border city is adjusting to new costs, compliance hurdles and long-term questions.

Nogales, AZ, the border city that sits a short drive — but a potentially long wait — away from its Mexican cousin Nogales, Sonora, has long been synonymous with the produce business. Located within easy reach of Mexico’s northern production regions, and U.S. central and eastern markets, the city handles an estimated 37% of all produce imports shipped from Mexico to the U.S.

But, despite being long-established in the city, there is a palpable unease among Nogales’ importers, particularly following the end of the Tomato Suspension Agreement in July 2025. The Trump administration’s decision effectively scrapped minimum prices for Mexican tomato imports in favor of imposing a 17.09% anti-dumping duty on all fresh tomatoes imported from Mexico.

“We’ve been trying to adjust to this new world — there are duties on tomatoes and there might be tariffs on other things if things don’t go right,” says Lance Jungmeyer, president of the Nogales, AZ-headquartered Fresh Produce Association of the Americas (FPAA). “We’ve seen a drop in overall volumes, so we’re definitely feeling the trade crunch.”

“Until earlier this year when there were tariffs on everything for three days, no one had dealt with tariffs since the late ’90s,” he adds. This means there are few people who know the mechanics of dealing with import duties and how they can affect a company’s bottom line.

“There are all different economic equations you have to make to figure out how your business adapts to that.”

WHO WILL SURVIVE?

FPAA is working with members on how to get paperwork prepared, so that if they are audited, they’ll have everything in order. But “how do you calculate dutiable value?” Jungmeyer adds. “Tomatoes are 16% of what crosses the border, and there are a lot of companies where tomatoes might be 70% of what they do, and they’re looking at their businesses and asking if they can afford to pay these duties or if they should get out of tomatoes, and some people are.”

Jungmeyer believes the crunch time will come during the next 12 months when it becomes apparent which companies are able to survive, and which ones drop out of tomatoes.

“This isn’t really hurting the Mexican growers as much — the importer is the one who has to pay the duty,” he says. “It’s Southeast U.S. versus Southwest U.S. in a political fight, but the U.S. companies on this side are getting punished. Some other framework would be better, but we think there should be tariff-free trade on entrance.”

With United States-Mexico-Canada Agreement (USMCA) negotiations restarting, Jungmeyer says importers will be paying close attention to how the talks “affect what we do at the border,” as well as how companies are regulated, and the possible imposition of tariffs.

“We want to know what the Mexican and U.S. governments will do to resolve this issue in a way that’s not punitive to the importers.”

CLOUD OF UNCERTAINTY

Established in Nogales in 2014, Produce House has its own growing operations in Sonora, Mexico, encompassing tomatoes, squash, cucumbers and other products. Currently in the process of strengthening its programs and expanding production into Sonora’s neighbor Sinaloa, the company recently moved to new facilities, adding cold storage chambers and doubling its floorspace to 100,000 square feet.

But while the outlook appears to be largely positive for Produce House, Director of Sales and Marketing Raquel Espinoza says the tariff situation has created a lot of uncertainty in Nogales’ produce industry. “Growers are worried about making planning decisions,” she says. “There’s a cloud of uncertainty about how these tariffs are going to work.”

Looking at the end of the Tomato Suspension Agreement, Espinoza believes the industry is “paying the price” for the events of 1996 when the U.S. Department of Commerce agreed to suspend its anti-dumping investigation on Mexican tomato imports.

However, she argues the tomatoes being imported in 2025 can’t be compared with those that were available 29 years before. “We’re not talking about the same tomatoes anymore,” says Espinoza.

“We’re looking to professionals within the industry to help us navigate through this new world, so we don’t fall into the same pitfalls again, and have an industry that is more resilient.”

Jaime Chamberlain, former chairman of the Greater Nogales Santa Cruz County Port Authority and current president of Nogales-based importer Chamberlain Distributing, has clear memories of the Suspension Agreement, having worked on its development in 1996. However, he says the family-run business decided to get out of the tomato business because of the terms negotiated in the last iteration of the agreement in 2019.

Chamberlain says Nogales importers are “walking around pretty shocked by what the Department of Commerce has done. Anti-dumping duty is very different from a tariff, and this is a significant change that is going to affect businesses in a negative way.”

“The most obvious way is the uncertainty,” he adds. “Here, we aren’t making investments for the next day, our investments are made with the expectation we will see a return in three to five years.”

In the case of Chamberlain, these investments include helping growers in Mexico install new shadehouses and desalination plants. But, he says, the imposition of the duties will cause many importers to ask whether they can afford to pay their growers and the U.S. government at the same time.

Despite the challenges, Chamberlain, whose company recently celebrated 56 years in business as an importer of fruits and vegetables from Mexico, remains upbeat about the Nogales’ produce industry.

“I can go and sell in Europe or Asia, but at the end of the day, the U.S. is Mexico’s biggest market, and Mexico is the U.S.’s biggest market.”

INNOVATION CONTINUES

This is likely why, far from being deterred by the setback of the Suspension Agreement, Nogales’ companies are continuing to invest and innovate. In the case of importer SunFed, based in Rio Rico, AZ, these investments have taken the form of the expansion of a pilot program for conventional and organic Roma tomatoes, plus diversification into the carrot space, according to its vice president of sales and marketing, J.C. Myers.

SunFed completed two significant projects — an upgrade of its solar grid in order to offset up to 80% of its energy costs, and a revamp of its value-added packing, enabling it to shrink wrap over different tray sizes.

The company’s vice president of finance and legal, Matt Mandel, says that while SunFed’s imports are subject to review by any one of over 40 different government agencies, the main entity responsible — Customs and Border Protection (CBP) — efficiently processes cargo, and, for the most part, the border crossing process remains fairly fluid.

“We have a great relationship with our local entity, and they are very receptive to our feedback as to ways we can mutually improve the crossing process,” he says. “We applaud the introduction of non-intrusive inspection tactics (X-ray surveillance, among others) and hope they will continue to be implemented, and their use increased to meet both of CBP’s mission directives.”

In a similar vein, Michael DuPuis, head of public relations and quality assurance at Divine Flavor, also based in Nogales, says the company has sought to differentiate itself in the vegetable space through innovative pack presentations.

Although better known as a top table grape importer, Divine Flavor has been focusing on achieving 12-month vegetable availability from Mexico by expanding production from northern Mexico into central states, DuPuis says.

“We have expanded our footprint in Mexico’s Bajío region into Guanajuato and Querétaro, adding greenhouse-grown bell and mini peppers, and Roma and beefsteak tomatoes,” he says. “We are finding a lot of good growers that fit the Divine Flavor mold, and the technology and innovation are really well set up there. They are dedicated to what Divine Flavor is gearing up to do in terms of sustainability and organics.”

David Watson, senior vice president of sales and marketing at Rio Rico, AZ-based Fresh Farms, says business has continued to evolve, with the company adding grape volumes and varieties, and tomatoes as a new division. Additionally, Watson says Fresh Farms has increased its packaged peppers and corn tray production and operations in response to growing demand, opting to pack at source rather than repacking in Nogales.

As far as the trade situation is concerned, Watson believes the imposition of duties will increase costs, from fertilizer to packaging materials, in addition to the uncertainty over how the duties and wider tariffs will affect everyone in the supply chain.

“Retailers are uncertain, as are growers and foodservice distributors, but at some point the higher costs will be passed on the consumers,” he predicts.