Amid chatter that the Trump administration may try to help ease the pain to growers, China planned to up its retaliatory tariffs on U.S. imports.
The July list of retaliatory tariffs come after China on April 2 slapped on 15% tariff increases on U.S. apples, pears, oranges, cherries, grapes, strawberries, peaches, lemons, mandarins, plums, almonds, cashews, pistachios, walnuts and other commodities.
Mexico’s 20% tariffs on apples and other U.S. agricultural commodities, in place since May, have already slowed apple shipments there.
A looming 25% tariff increase by India on U.S. apples in early August — adding to an existing 50% tariff there — is casting a shadow on the start of the 2018 season, apple industry leaders said.
Seeking to protect U.S. national security interests, the Trump administration this spring slapped tariffs on steel and aluminum imports from a range of countries and added extra tariffs on China for its unfair practices related to technology.
Unless there is an 11th-hour deal, the Trump administration on July 6 was expected to put in place tariffs on $34 billion in Chinese imports, and China said it would respond in kind the with expanded tariffs on U.S. goods.
China and other countries that have been hit with steel and aluminum tariffs have retaliated by targeting U.S. steel and aluminum products but also many U.S. agricultural commodities, including key perishable commodities.
The tariffs are beginning to hurt U.S. fruit exporters.
During the last two weeks of June, Washington apple exports to Mexico were off about 40% compared with the same two weeks a year ago, said Todd Fryhover, president of the Washington Apple Commission
Agriculture Secretary Sonny Perdue attended a breakfast in Richland, Wash., on July 3 with many area agricultural leaders, including Fryhover.
Topics discussed at the breakfast included immigration and farm labor, food safety regulations and, of course, the retaliatory tariffs.
Perdue didn’t have a lot of direct answers about how the tariff situation will be resolved, Fryhover said.
“If he had a message to us, it was, ‘Farmers are patriots, and we understand you are taking a hit,’” he said.
Perdue did talk about potential mitigation issues to help growers deal with the retaliatory tariffs and said he had a goal of working out details of the plan by Labor Day.
While trade leaders also want the USDA to help open markets for apples in key markets such as Korea, Japan and Australia, Fryhover said those are long-term efforts and unlikely to give quick relief.
With the 2017 apple crop perhaps 85% finished as of early July, Fryhover said industry leaders are concerned about export markets at the start of the 2018 marketing season.
“Exports are always very important on the front end of our season,” he said, noting strong domestic competitive fruit supply up until October.
With an ample apple crop anticipated, Fryhover said the industry has to “plan for the worst and hope for the best.”
There is no way to say what damage the tariffs may cause, but the 13-month cross-border trucking dispute with Mexico cost apple growers about $44 million with similar tariff levels imposed by Mexico.
Fryhover believes reality is starting to set in, and growers know exports will be very difficult.
China’s 50% tariff on apples could last a year or longer, and Mexico’s 20% tariff could stay in place until there is a resolution to the North American Free Trade Agreement negotiations. With Mexico’s recent elections, that may not happen until mid-2019, he said.
Fryhover said the apple commission will reduce its promotion activities in China, while increasing attention to the Vietnam market.
Mexico and India will continue to be supported because they are strategic markets, he said, noting that 60% of Washington red delicious exports typically go to those two countries.
“We can’t abandon these markets,” he said. “We just have to try to find a way to be effective and efficient with the money that we do have.”
About half of the Northwest cherry crop had shipped by July 3, and quality has been outstanding, said B.J. Thurlby, president of Yakima, Wash.-based Northwest Cherry Growers.
Even with a 35% tariff, shipments to China was about 440,000 cartons as of June 29, up from about 345,000 cartons at the same time last year. With retail prices for Washington cherries in China at $8 or $9 per pound, consumers were still buying fruit, he said.
However, that tariff was to increase to 50% on July 6, and Thurlby said exports in July will suffer. Last year, Northwest cherry exporters sold about 3.1 million cartons to China.
Even though a market like South Korea could take more cherries this year, it won’t compensate for the lost opportunities in China.
“The biggest thing you worry about, you know you have a billion people in China, you have 45 million people in Korea, and you worry that you have a certain point you have that saturation point,” he said.
Thurlby said exporters are cautious that the tariff increase may also be accompanied by delays in product clearing customs in China, which occurred to oranges and California cherries when the first round of tariffs were imposed.
For cherries, Northwest exporters will take a “wait and see” approach about how cherries clear customs after the tariff is imposed on July 6 before they jump back into selling to China, said Steve Reinholt, export sales director for Wenatchee, Wash.-based Oneonta Trading Corp.
“That (Chinese tariff on cherries) is definitely one that is going to leave a mark,” he said.
On the plus side, Reinholt said the cherry crop, smaller in volume compared with last year’s record crop, has high quality and strong domestic demand.
It may be too early to speculate about the impact of the pending India tariff since the 2017 crop is winding down, Reinholt said.
However, the 20% tariff in Mexico is already causing pain, Reinholt said, with some importers asking for price relief. “As an industry we ship a ton of fruit down there and we need that market to be open and free,” he said.
Reinholt said it could be another three months before new crop apples are shipped to Mexico in significant volume, so the impact of the tariff will be clearer by then.
Some lawmakers on Capitol Hill have been seeking to check Trump’s moves to impose tariffs, said Alice Gomez, legal counsel with Washington, D.C.-based Cornerstone Public Affairs.
Sen. Bob Corker, R-Tenn., in June introduced a bill that would require lawmakers to approve of trade actions by the president that are done on the grounds of national security.
Beside fruit growers, she said pork producers are very concerned about what Mexico’s tariff on pork will mean to their export sales.
“This is an election year, and it should be concerning for this administration that some of some of their strongest supporters are being targeted for retaliation based on the actions that the administration is taking,” Gomez.
With Midwest soybean and pork farmers now affected by retaliatory tariffs, Richard Owen, vice president of global membership and engagement for the Newark, Del.-based Produce Marketing Association, said increasing numbers of lawmakers are calling for a different approach.
“You are seeing members of Congress responding to their constituencies, including Republican constituencies, (saying that) something needs to change or we’re going to see the economy start to slip,” he said.