U.S. Fresh Produce Exports to China in 2017
The presidents of the U.S. and China have been going back and forth with tariff threats, and the situation is expected to affect the produce industry. ( File Photo )

President Donald Trump has directed U.S. Trade Representative Robert Lighthizer to put together a list of another $200 billion of Chinese goods to subject to tariffs.

Just days earlier, the president announced 25% tariffs on $50 billion of Chinese goods, and China retaliated by raising tariffs to 25% on $50 billion of U.S. goods.

U.S. goods targeted by China include apples, cherries, oranges, pears, clementines, potatoes, tomatoes, garlic, cauliflower, broccoli and most other fresh produce.

Barring any changes or negotiated compromise, U.S. tariffs on $34 billion of Chinese goods will go into effect July 6, with the date for tariffs on the rest of the $50 billion of Chinese goods yet to be announced. In response, China plans to implement its higher tariffs on $50 billion in U.S. goods on the same timeline.

Richard Owen, vice president of global membership and engagement for the Produce Marketing Association, said the situation certainly factors into business decisions being made now by marketers, particularly for cherries and apples, but the trade back-and-forth could have longer-term implications as well.

The big questions, Owen said, are how much further the escalation will go and at what point do buyers in China decide to simply source their produce from other countries.

Tariffs and accompanying trade tension could result in U.S. suppliers being viewed as simply being too expensive and perhaps unreliable, Owen said.

Trump has stated that the reasons for the tariffs are to force China to change what he describes as unfair practices and theft of intellectual property and technology.

He has stated that if China refuses to change and retaliates when the U.S. puts into place tariffs on another $200 billion on Chinese goods, the U.S. would then pursue tariffs on an additional $200 billion of Chinese goods.

“The trade relationship between the U.S. and China must be much more equitable,” Trump said in a statement released June 18. “I have an excellent relationship with President Xi, and we will continue working together on many issues. But the U.S. will no longer be taken advantage of on trade by China and other countries in the world.”

 

Apples

Todd Fryhover, president of the Washington Apple Commission, said the effect of the upcoming round of China tariffs 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.

Fluidity might be the best word to describe the whole situation, Fryhover said, and there are too many moving parts at the moment to have a firm grasp on what the effect the tariffs could be on the upcoming apple season.

Even so, in addition to figuring into the plans of apple marketers, the tariffs are something the commission has to consider as it plans for the 2018-19 season. In recent years the organization has invested significant resources in developing consumer awareness in China.

That investment could be smaller in 2018-19 given the trade situation, Fryhover said, depending on whether the tariffs go into effect as planned.

 

Citrus

Joel Nelsen, president of California Citrus Mutual, said the industry is very concerned with the coming implementation of a 25% tariff on exports to China.

The implications of the tariff are more immediate for some other commodities — cherries and apples among them — but 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.

Nelsen said 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.

The produce industry understands what the administration is trying to accomplish with the tariffs but wants to see some consideration for growers and marketers given the unintended consequences they are experiencing, Nelsen said.

He has spoken with the administration about ways to address those challenges through existing avenues like the Market Access Program, the Emerging Markets Program and Technical Assistance for Specialty Crops.

The federal government could offset some of the effects of the tariff situation on growers in a couple ways. The administration could provide more funds to stimulate demand for U.S. produce in other foreign markets, or the government could foot more of the bill for some of those programs — which are also supported by industry members — so growers and marketers can recover some of their margins.

Nelsen said the response of the administration to these ideas has not been negative, but neither has there been any commitment.

He plans to speak with people there again the week of July 16, at which point he hopes the administration will have identified a path forward.

 
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