Recently harvested navel oranges travel on conveyor systems at Kings River Packing, northeast of Sanger. Photo by David Castellon.
Just a couple of months ago, Jeff Bitter was a bit more optimistic than he is now that the U.S. and China might soon end their tariff war.
Then came the Trump Administration’s announcement that tariffs on $200 billion in goods exported from China to the U.S. would be raised from the 5-10% percent previously imposed to up to 25%.
China responded in much the same way by announcing it would raise duties on $60 billion worth of U.S. goods starting June 1.
A total of 5,140 U.S. products will be subject to additional tariffs of 5-25%, among them agricultural products originating in the Valley and other parts of California, including mixed fruit juices, some frozen fruits, nuts, beef and sheep meat, fresh flowers, spinach, sparkling wine and other goods.
The new tariffs are on top of what Chinese leaders slapped on other U.S. goods last year in retaliation for the U.S. imposing duties on Chinese goods.
Many trade experts see the latest tariffs as a sign that trade negotiations between the two countries will draw out rather than be resolved soon.
That’s how Bitter, president of Fresno-based Allied Grape Grower’s sees it.
“You tend to lose a little bit of confidence in progression when you have a setback,” said Bitter, whose organization is a marketing cooperative for California wine grape growers.
Wine products already had been hit by Beijing imposing two 10% tariffs, and another 15% will be added in June. But that’s not all, as additional Chinese taxes and fees resulting from the higher sale prices in China actually will raise the prices for California wines cumulatively by 91%, Bitter said.
But while some vineyards here are being hit hard by the decline of wine sales in China, overall those losses aren’t very high for the industry, in part because Chinese consumers seem to still want to drink California wine, even if the they have to pay nearly double the price.
More importantly, China has only recently begun growing its middle class that can afford California wines, so China sales account for less than 1% of the state’s wine exports.
“It’s a growing market, for sure,” Bitter said. “And it is not helping our situation when the Chinese have the opportunity to purchase Australian wines,” which have no tariffs.
So far, the biggest effects of China’s tariffs on Valley agricultural products have been on nuts, wine, citrus and strawberries, but experts contacted said they haven’t seen many definitive assessments on how the tariffs are affecting sales to China.
Among the exceptions are oranges. Casey Creamer, president and CEO of California Citrus Mutual, the Exeter-based nonprofit trade association representing about 2,500 citrus growers across the state, estimated the China tariffs could reduce sales of California oranges by about 70%, “which is a big chunk of the $200 million in citrus we export to China.”
Besides the tariffs reducing demand for California oranges in China, more fruit is ending up in U.S. grocery stores, further softening prices.
Fortunately for the industry, whole citrus isn’t being targeted in the latest Chinese tariff increase, Creamer said.
“It’s tough to say how this is going to affect every individual grower, but as an industry, I think we can manage this and move forward.”
While pistachios were targeted early by Chinese tariffs, the financial effects on farmers here haven’t been nearly as bad as initially expected, as Iran — California’s chief competitor worldwide for producing the nuts — had one of its worst crops ever recorded last year, said Dan Sumner, director of the University of California’s Agricultural Issues Center.
“And the U.S. had the biggest crop in its history,” he said, “so at a time when it was harder to export pistachios to China, our chief competitor had virtually no exports.
“So it becomes a wash,” he added.
California walnut growers also had a huge crop last year, “but they’re selling world wide for about half of what they sold for a year earlier, and that’s almost all due to the trade turmoil with India, Turkey and China,” he said.
“Growers can say we would have made a bunch of money on China without the dispute.”
It’s important to remember that China isn’t the only country involved in a tariff conflict with the U.S.,
“For example, the U.S. is facing a 100 percent tariff on walnuts to India — which is a big market — for what they considered were the illegal tariffs we put on [their] steel and aluminum,” he said.
That’s why last week’s announcement that tariffs between the U.S. and Mexico had been lifted was so welcome for the ag industry, particularly for dairies, which heavily export dairy products to Mexico, and the wine industry, a heavy exporter to Canada, Sumner noted.
Some of the tariffs not ag related, including steel and aluminum, also affected farmers and ranchers here.
“So every time a vineyard owner wants to lay out a new vineyard, they pay more for true steel posts, and they pay more for the inputs that go into things, because the U.S. has to pay tariffs.”
All this makes it even more difficult to gauge the monetary effects of the tariffs on U.S. agriculture and other industries.
“In my opinion, the threat still looms that these tariffs can have long-term effects on California growers, but it’s still our sincere hope that a quick resolution will be made to settle the disputes and open these markets up to California growers,” added Ryan Jacobsen, CEO of the Fresno County Farm Bureau.
But Moody’s Investors Service posted online after the newest tariffs were announced, “China’s hike in tariffs reinforces our view that rising US-China trade tensions will continue for a prolonged period.
“The escalation of tensions also signals the increased possibility of additional restrictive trade and investment measures from both sides, including US tariffs on the remaining $325 billion of imports from China that are not currently targeted.”
“No one wins trade wars, not even the bystanders. So, while trade diversion may temporarily benefit some countries, we calculate that the imposition of tariffs on all US-China trade, equivalent to 4% of global trade flows, would reduce global [gross domestic product] by .5% in 2020. The U.S. would suffer a .5% loss and China 1.3%,” states a May report by Oxford Economics, a British-based forecaster and analyzer of economic issues.
It goes on to say that “if the bilateral tensions spiral into a full-blown global trade war, we would expect this to trigger a global recession.”