China puts tariffs on $3B worth of selected U.S. food exports

Dive Brief:

In retaliation for tariffs President Trump announced on Chinese steel and aluminum, some U.S. food products exported to China now face 25% or 15% tariffs, according to CBS News. On Monday, China started imposing the previously determined import taxes on 128 items, many of which are U.S. food and agriculture products.
Exported U.S. pork products will be hit with a 25% duty by China, while U.S. wine, fresh and dried fruit and nuts will be charged a 15% tariff. On China's list of U.S. commodities to be taxed are apples, pears, oranges, cherries, strawberries, peaches, lemons, mandarins, plums, almonds, cashews, pistachios and walnuts, The Packer reported.
The targeted U.S. fruit and nut exports are worth $977 million, The Packer noted, while exports of U.S. pork and processed items have been valued at almost $2 billion.

Dive Insight:

China announced earlier that it wasn't afraid of a trade war with the United States. The Chinese Ministry of Commerce said in a statement posted Sunday that the U.S. had harmed China's interests and "seriously violated" World Trade Organization rules regarding principles of non-discrimination, according to Reuters.

"China's advocacy and support for the multilateral trading system and the suspension of tariff concessions to the United States are legitimate measures taken by China to use the rules of the World Trade Organization and safeguard its interests," the statement noted.

Both countries have plenty to lose in this ongoing dispute. According to an AP story in Time, China calculates that two-thirds, or about $275.8 billion, of its global trade surplus is with the U.S., while the U.S. trade deficit with China has hit a record $375.2 billion.

Much of the Trump administration's recent approach to Chinese trade has centered on accusations of systematic intellectual property theft and not issues related to food and agriculture. However, the new tariffs will have a serious impact on American farmers, producers and manufacturers, many of whom live in areas that helped to elect Trump. As a result, the administration continues to get pressure from lobbyists and members of Trump's own party to cut back or eliminate tariffs on Chinese goods. Chances are they are also thinking of the midterm elections, which are just seven months away.

According to Bloomberg, China is the No. 1 global pork consumer, one of the main buyers of U.S. agricultural products and the second-biggest market for pork by volume. But even though U.S. pork markets rely heavily on exports, this tariff may not cut too deeply. China has reduced its need for imports because domestic hog prices are slumping, and Smithfield, the top U.S. pork producer, has had to seek customers elsewhere, according to Reuters, and is exporting more pork products to Mexico, Japan and South Korea.

The tariffs will likely hurt farmers more. In the tree nut and fresh produce categories, China purchased $100 million in pistachios and $41 million in almonds last year, according to The Packer. while U.S. cherry exports were valued at more than $122 million, oranges at $48 million and apples at $18 million in 2017.

Expected to be hit particularly hard are U.S. cherry growers. That's because their product can't be stored like apples, and growers can't easily turn to other export markets to compensate. Desmond O'Rourke, a market analyst with Belrose, Inc., in Pullman, Washington, told The Packer that growers there have been hoping for more exports rather than less.

"Sweet cherry folks may be the hardest hit if the market is restricted, because China is much more important to sweet cherries than it is to the apple guys," O’Rourke said. "With apples you can store them and try to find new markets, but with sweet cherries, it is too late to find other markets."

In trade policy, Trump has generally focused on imports, manufacturing and trade deficits, as well as jobs in the factory sector for blue-collar Americans. Consequences to farmers who rely on exports have not appeared to figure in his calculations. This action by China disproportionately impacts food producers, who have repeatedly asked the administration to remember them as they take a new look at trade agreements.

Officials from the U.S., Mexico and Canada are also currently working to renegotiate the North American Free Trade Agreement. A newly negotiated pact could have far-reaching impacts on U.S. producers, as well as American consumers who may not be able to find their favorite produce items, such as avocados, at the grocery store. And with Trump threatening over the weekend to toss out the trade deal if Mexico does not fund construction of a wall at the U.S. border, those impacts may be felt sooner rather than later.