China retaliates with tariff hikes on frozen fruits and vegetablesMay 15, 2019
China’s latest round of tariff retaliation hit frozen fruits and vegetables but appeared to spare additional hikes on imported U.S. fresh produce. “Overall, most fruits, vegetables, and tree nuts were spared,” said Roland Fumasi, vice president and senior analysts for RaboResearch Food & Agribusiness N.A.
In response to a lack of progress in resolving trade issues with China, the Trump administration on May 10 increased duties on $200 billion worth of Chinese products from 10% to 25%. The Chinese retaliated with a list of tariff hikes on U.S. goods, which are in addition to any that already exist on those products. The new Chinese tariffs take effect June 1.
According to a Chinese government release translated by RaboResearch, frozen fruit and vegetable increases include:
25% tariff increase for frozen peas, spinach, and berries (other than strawberries);
20% tariff increase for cold or frozen sweet potatoes and frozen strawberries; and
10% tariff increase for frozen potatoes and sweet corn.
Fumasi said he believes the largest effect may be felt in California in the frozen strawberry deal. China accounted for about 7% of U.S. frozen strawberry export two years ago and about 6% in 2018, he said.
“(China) is in the low single-digits (of total exports), but in a deal like that every market matters.” The latest tariff hike on frozen strawberries adds to earlier retaliatory tariffs on the commodity and already existing tariffs.
“We already had a tariff over there of 30% and then when they did that first round of tariffs (last year), they added an additional 15% which brought it to 45% total; now they are going to hit it with an additional 20%, which will make the applied tariff rate for (U.S.) frozen strawberries going to China at 65%,” he said.
In California, frozen strawberries are produced by the same growers producing fresh-market berries, typically from late-season harvest.
On the other hand, frozen sweet corn is grown by specialized processed vegetable growers in Washington and Minnesota. Last year, about 17% of frozen U.S. sweet corn exports went to China.
The latest escalation in the U.S.-China trade war could be viewed two ways, Fumasi said.
“It’s another play where we’re not necessarily heading in the right direction, so it potentially lengthens the trade war for other crops,” he said, noting the negative effects on U.S. fresh fruit and nut exports to China.
“You can argue with the other way and say look, as pressures get turned up on more products and more tariffs on both sides, maybe that does add additional pressure…and maybe it hastens resolution,” he said.
That second interpretation seems to be the Trump administration’s argument, he said. “On the surface, it seems like we’re headed in the wrong direction of getting this resolved,” he said. “I don’t know which (argument) is right.”
The U.S. Department of Agriculture reported that total U.S. agricultural exports to China in 2018 totaled $9.2 billion, down from $19.5 billion in 2017. From January through March this year, total U.S. agricultural exports to China totaled $2.78 billion, down from $4.6 billion for the same period in 2018.
By The Packer