Trade tension intensified this week as the U.S. attempted to pressure China into ceasing what President Donald Trump describes as unfair trade practices, including the theft of intellectual property and technology.
The administration has promised to protect farmers targeted by retaliatory tariffs from China, but produce industry leaders expect business to be affected in short order and Trump has yet to give specifics on how he plans to make growers whole when they start losing sales.
What follows is a look at the key elements of this trade situation, informed by numerous interviews this week with Produce Marketing vice president Richard Owen, Washington Apple Commission president Todd Fryhover and California Citrus Mutual president Joel Nelsen.
Which fresh produce items will be subject to the new 25% tariffs?
Apples, cherries, oranges, pears, clementines, potatoes, tomatoes, garlic, cauliflower, broccoli — the list just keeps going on and on. Brussels sprouts, cabbage, asparagus, eggplant, celery, mushrooms, bell pepper, spinach and artichokes are among other products included.
When do the tariffs kick in?
For both the U.S. and China, 25% tariffs on the bulk of the $50 billion set of products affected this round will be put in place July 6. Trump has also threatened to levy 10% tariffs against another $200 billion of Chinese goods if the country doesn’t end what Trump describes as unfair trade practices and the theft of intellectual property and technology. Retaliation to those will spur more tariffs, Trump has warned.
Which segments of the produce industry could be hurt most by these tariffs?
Cherries, oranges, grapes, apples and plums were the top five U.S. fresh fruit exports to China last year, according to PMA. The value of cherries exported to China in 2017 was nearly $123 million.
Oranges were a distant second with more than $48.5 million shipped to China last year, while grapes and apples took the next two spots with roughly $22 million and $17.7 million, respectively. Plum exports to China in 2017 totaled about $10.6 million.
The Chinese market is most immediately significant for cherries and plums because 19% of U.S. cherries exported go to China and 12% of U.S. plums exported go to China, according to PMA. The Northwest cherry season runs from June through August, and California produces plums from May into October.
How could the tariffs affect producers in the next several months?
B.J. Thurlby, president of Northwest Cherry Growers, said the industry expects significant volume decreases in China this season. Exporters have been shipping small amounts of fruit to China this week — some being held and some passing through quarantine without incident, Thurlby said.
He expected other markets including South Korea and southeast Asia to take more cherries this year but said the industry is taking a huge hit in the trade war. The uncertainty of the situation also makes it difficult to move promotional funding out of China and into other markets.
Todd Fryhover, president of the Washington Apple Commission, said the impact on the balance of the 2017-18 apple season should be fairly minor because more than 80% of the crop is sold, and volumes going to China are normally lower this time of year.
However, looking ahead to next season, companies have to figure out whether they can depend on China or whether they need to find other markets for their fruit. The size of the crop is a crucial factor in that decision, but the industry will not have an estimate until August.
Joel Nelsen, president of California Citrus Mutual, said that if the 25% tariff is in place when California citrus marketers start talking with Chinese buyers in August and September, the cost of the fruit will be a non-starter.
Even the much lower 15% tariff put in place this spring hurt sales to China in May and June, with some buyers canceling loads of lemons and valencias and business slowing significantly, Nelsen said.
What about the administration’s promise to keep farmers from being casualties in a trade war?
The U.S. Department of Agriculture insists it still has the interests of growers in mind and will have their back when tariffs hurt their business. Asked which programs the USDA could use to render some assistance and when growers will find out what those options are, the USDA responded June 20 with a statement that it will indeed help farmers but that it will not provide details because “it is not good practice to open our playbook while the opposing team is watching.”
What are specific ways the government could help offset the effects of the tariffs for growers?
Joel Nelsen with California Citrus Mutual and Todd Fryhover with the Washington Apple Commission both noted that increasing Market Access Program funding would be helpful in the face of tariffs rendering companies less competitive in China.
Fryhover noted that more MAP money would be useful not only to build demand in other markets but also to eventually rebuild demand in China, as interest in Washington apples will wane if the product is not available in the market for an extended time.
Nelsen suggested the administration could also give back to the industry through the Emerging Markets Program or through Technical Assistance for Specialty Crops.