Retaliatory tariffs taking a toll, growers tell Cantwell

By:  Nevonne McDaniels
Source: The Wenatchee World

WENATCHEE — The last load of Bluebird Growers’ cherries left Tuesday for China.


“Today is the last day we are going into China because of the new tariff that’s coming. We’re going to see what happens with the market after that day,” Bluebird President Ron Gonsalves told U.S. Sen. Maria Cantwell during a meeting with fruit growers and ag industry leaders to discuss the impacts of retaliatory tariffs on the industry.


A new 25 percent tariff starts Saturday, on top of the existing 40-percent tariff, which increased by 15 percent in April.


“The market has been fine to this point. We’ve seen a few problems with inspections and a few retaliatory things on arrival, but it’s been OK. That’s going to change,” Gonsalves predicted.


Stemilt Growers has similar concerns, but is taking a different tack.


“The shipments to China have to continue,” said Dave Martin, Stemilt’s export sales manager. “There’s only so many homes in the world where we can put this crop. We can only sell so much of it here in the U.S. There are airplanes for China planned for Thursday, Friday and Saturday this week.”


He does agree with Gonsalves that they don’t know what will happen Saturday when a total 65 percent tariff is imposed. The question is how much will be passed on to consumers in China or absorbed by shippers and growers.


Cherries, considered a luxury there, currently sell for about $8 a pound. The tariffs could raise the price to $9.50 or $10 a pound. Whether consumers will pay remains to be seen.


“The money has to come from somewhere. You may see an increase in the price on their side,” Martin said. He doubts it.


As do others in the industry who outlined the most likely alternative scenarios for Cantwell and state Agriculture Director Derek Sandison during Tuesday’s discussion.


The meeting followed a tour of Columbia Fruit Packers’ busy cherry packing line in Olds Station, which helped bring home the idea of what’s at stake, Cantwell said.


Cantwell recently put forth an amendment to the Senate Farm Bill to allocate an additional $6 million in discretionary funds toward agriculture export programs, like the Market Assistant Program and Foreign Market Development Program. The programs are designed to help open new markets for export and have been used successfully in China and India.


“We tried to brainstorm on what we can put on the table,” she said.


On Tuesday, she wanted to find out more about the challenges the tree fruit industry is facing.


“I remain very concerned and interested about what’s happening with tariffs and what I think is an acceleration of a trade war,” she said. “I hope that we can get people to realize that we have a growing market around the globe and a lot of hard work has been done getting in there. We want to keep the markets open.”


Washington is one of the most trade-dependent states in the country. Forty percent of jobs in the state are tied to international trade, representing roughly 1.5 million jobs.


The apple industry accounts for $721 million in annual exports, and cherries account for $358 million in annual exports. Both are facing retaliatory actions by U.S. trading partners around the globe in response to trade actions initiated by the Trump Administration.


The cherry industry is the first to take the hit. Harvest started in mid-June and is going full steam now.


“The timing is the bad part of this,” said Bryon McDougall of McDougall and Sons. “We’re getting into varieties now that typically have more export demand. The volumes are increasing. If the market is not functioning properly, it will mean more boxes on the domestic market.”


It highlights the lack of access to other markets, he said. If cherries that normally would go to China are sent to other export markets, the prices will drop because of the increased supply.


Apples are facing a similar problem.


Todd Fryhover, president of the Washington State Apple Commission, said the impacts on the tariffs already in place are being felt.


“Today we have a 20 percent tariff in Mexico. If you compare shipments for the past two weeks, this year with last year, we’re off 40 percent on shipments to Mexico. If you look at China, we’re off 86 percent. So we are seeing the impact,” he said.


Other countries are lining up to fill the gaps in market demand, providing quality product at a better price because they don’t have the tariffs.


China currently doesn’t have access to the Indian apple market, Fryhover said.


“If they gain access, which we think they will this year, they will have a freight advantage,” he said, in addition to not paying the retaliatory tariff.


A similar scenario is playing out with the showdown on the North American Free Trade Agreement, with Mexico and Canada, which applies to pears as well as apples.


“In Mexico today, we’re their primary apple supplier, but others are going to have access. The customers will move away. There’s a lot of impact,” he said.


Doug Pauly of Northern Fruit Company said the tariffs make it impossible to compete.


“The apple growers are getting hit from four directions, seeing four different curtains drop on four export markets — China, India, Mexico and Canada. It gets really difficult. We’re going head to head with good competitors with cheap labor. We have a double handicap there,” he said.


Those at the table said they are likely to weather the storm.


“The ones who are going to get hit the hardest are the small growers,” Gonsalves said. “They’re already struggling with minimum wage hikes, regulatory costs and now trade issues.”


Cantwell asked for suggestions.


“I’m all ears,” she said. “You give me an idea and I’ll communicate anything. We will keep talking to the entire cabinet. I have a feeling this is going to go on a while. Sometimes you know there’s a deal that’s about to pop out. I don’t expect much to happen in the next few months. But we are always ready. Sometimes you can catch a wave and move something through.”


The response from the table included: 

Open more markets.

Negotiate out of the tariff and trade war.

Focus on India, which has expansion opportunities.

“I would like to see the U.S. Trade Representative spend more time in India, in lieu of China if they have to,” Martin said. “I think there’s a relationship there that’s easier to save. They have a huge population base, a rapidly growing middle class. If we can find a way to negotiate ourselves out of a tariff situation in India, we could have a nice counterbalance to what’s happening in China.”