Retaliatory tariffs still hitting fresh produce exports

(File image)

Hundreds of millions in U.S. fresh produce and nut export sales have been lost because of retaliatory tariffs, USDA economists report. And the toll keeps rising.

Specialty crop losses from retaliatory tariffs put in place in 2018 by China, India and four other trading partners in response to U.S. tariffs on steel and aluminum imports and other tariffs on Chinese goods totaled $837 million in 2019.

That estimate comes from a just-published analysis from the USDA’s Economic Research Service, authored by Stephen Morgan, Shawn Arita, Jayson Beckman, Saquib Ahsan, Dylan Russell, Philip Jarrell and Bart Kenner.

The U.S. agricultural products targeted for retaliation were valued at $30.4 billion in 2017, with individual product lines experiencing tariff increases ranging from 2% to 140%.

At the commodity level, the authors found that soybeans accounted for the largest share of total export losses from the retaliatory tariffs, accounting for nearly 71% of losses ($9.4 billion). The report said sorghum accounted for over 6% ($854 million) and pork just under 5% ($646 million). 

“Overall, specialty crops represented around 6% of losses ($837 million in annualized losses) across fruits, vegetables and tree nuts, which are on par with losses in sorghum,” the authors said. “However, it is important to highlight that some specialty crops (e.g., sweet cherries) had relatively higher losses due to export reliance (a lack of alternative markets) and product perishability.”

Jim Bair, president and CEO of the U.S. Apple Association, said the tariffs have been painful for U.S. apple growers.

U.S. apple exports to India — the no. 2 market at the time the retaliatory tariffs went into effect — declined 77% from 2018 to 2020 and more again in 2021, he said. 

“The retaliatory tariffs have cost U.S. apple growers hundreds of millions of dollars in lost sales, and those apples that should have been exported but weren’t, they just overhang the market and depress prices for all growers nationally,” Bair said. “We have been discussing this with Biden Administration officials since just after the November 2020 election, but getting traction has been difficult. Current shipping and other supply chain issues surely add to the complexity of the problem.”

The solutions of removing U.S. Section 232 and Section 301 tariffs sound simple, said Mark Powers, president of the Northwest Horticultural Council, Yakima, Wash. “Obviously, it is not that simple,” he said. “Apple and cherry growers did not create the problems the U.S. seeks to resolve.  Our growers are collateral damage in a three-year trade war and are paying a heavy price to protect steel workers and resolve geostrategic issues with the People’s Republic of China.”

Powers said China is an important export market for cherries. In fact, in 2017, it was the second largest market after Canada. Pacific Northwest cherries exported to China and Hong Kong in 2017 (before the Section 232 and 301 retaliatory tariffs) were valued at $141 million. By the 2021 season, sales have been reduced by more than half to $56 million, Powers said.

Heavy toll

 

The USDA report said that, from mid-2018 to the end of 2019, U.S. agricultural exports were cut by more than $27 billion because of retaliatory tariffs, with most of the losses coming from exports to China.

Across retaliatory partners, China accounted for approximately 95% of the losses ($25.7 billion), followed by the European Union ($0.6 billion) and Mexico ($0.5 billion), with Canada, Turkey and India having smaller shares. The report estimated that annualized losses for selected commodities from retaliatory tariffs were $13.2 billion from mid-2018 to the end of 2019.

U.S. agricultural exports experienced a gradual increase after the U.S. and China signed the Phase One Agreement in January 2020.

In the agreement, China agreed to expand purchases of certain U.S. goods and services by a combined $200 billion for the two-year period from Jan. 1, 2020, through Dec. 31, 2021, above the 2017 baseline levels. That included an agreement to purchase $12.5 billion in U.S. agricultural products above what they purchased  in 2017, according to a Farm Bureau summary.

China granted exemptions on retaliatory tariffs for some agricultural products (pork and soybeans) after the Phase One Agreement was signed, but that list of exemptions did not include apples and other fresh fruit, according to the report.

“It is important to highlight that many of these tariffs remain in place and are affecting U.S. producers,” the report said.

“Continued analysis of the issue is needed to assess the total costs to U.S. producers over time.”

Exports of apples continue to suffer from the retaliatory tariffs, recent trade numbers show.

USDA data shows U.S. exports of apples to China totaled $10.98 million from December 2020 to November 2021, down by nearly 44% compared with the same period in 2017. U.S. apple exports to India totaled $24.1 million for the year ending November 2021, down by 85% from $162.8 million from the same period in 2018

At the state level, the report said California suffered the eighth-largest loss in exports among all states, with a 5.2% share of total ag export losses for the period studied. Washington accounted for the 21st most losses, with a 1.1% share of total losses.

The report said losses from retaliatory tariffs in Washington were driven by processed and fresh fruits ($102 million combined), as well as wheat ($25 million). California’s trade losses were concentrated in processed/fresh fruits ($374 million combined), tree nuts ($199 million) and dairy products ($68 million), the report said.
 

 

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