Pence: U.S. has ‘put China on notice’
Roughly a year into President Donald Trump’s trade wars, California farmers have escaped the kind of economic blow that has walloped some of their Midwestern counterparts.
But it’s not clear how much longer they can continue to avoid more serious repercussions, especially in light of the Trump administration’s admission Wednesday that a deal with China is still some ways away.
President Trump on Monday delayed expected tariff increases and told the press the United States and China are “very, very close” to a trade deal.
His top trade adviser, Ambassador Robert Lighthizer, had a more somber assessment while testifying at a congressional hearing on Wednesday.
He said “much still needs to be done” before the two sides can reach an agreement to roll back the escalating tariffs they have slapped on one another.
That’s not what California’s agriculture industry, particularly nut growers, was hoping to hear.
“We’re optimistic that we can potentially see some results from these tariff negotiations,” California Walnut Board and Commission CEO Michelle Connelly told McClatchy earlier this week. “I hope that would set the tone of other future negotiations.”
The United States, for example, is still negotiating with Canada and Mexico to reverse steel and aluminum tariffs that elicited retaliatory tariffs on American dairy products and other exports. Lighthizer testified Wednesday that “we want very much to work out an agreement” with America’s two neighbors. “We’re in the process of doing that.”
The new NAFTA agreement reached in November 2018, formally known as the U.S.-Mexico-Canada Agreement, also faces a contentious ratification fight in Congress this year.
Other major export destinations like Turkey and India have also ratcheted up tariffs on California nuts as a result of trade spats with the Trump administration. But “really, what we are all waiting for is some resolution on China,” said Connelly.
California is a major exporter of nuts, such as almonds, pistachios and walnuts, as well as berries and other fruit, dairy products and hay.
Walnut growers send nearly two-thirds of their crop abroad, Connelly said. The tariff increases over the past year haven’t stopped them from selling nuts overseas, she said, but “unfortunately not at prices the industry would hope.”
That’s a reality that many of California’s specialty crops are facing, says agriculture economist Daniel Sumner, director of the University of California at Davis’ Agricultural Issues Center.
Sumner and PhD student Tristan Hanon released a paper in August 2018 that attempted to predict the economic impacts of rising foreign tariffs on U.S. fruit and tree nut exports. All told, they estimated a revenue loss of more than $3 billion.
Sumner is hoping to revisit those estimates once the full crop data for the 2018 season is released. He told McClatchy that one thing is already clear: China has not used all the levers of power of centralized government to block American agriculture imports, as he thought it might.
“So what we’re seeing so far is that the worst, nightmare scenario in terms of (import) quantities has not happened,” Sumner said.
That’s the good news. The bad news, he said, is that “prices are down and they seem to be down quite substantially,” the likely result of both the size of many fruit and nut crops harvested last year and the impact of tariffs.
The lower prices probably reflect an increased supply of California crops after many fruit and nut growers recorded banner crops last year, as well as potentially diminished demand because of the tariffs,
Some growers are feeling the sting of tariffs in other ways. While China is one of California wine producers’ fastest growing markets, “I can’t tell you that a near term interruption is going to have a significant effect on prices paid to winegrape growers,” said John Aguirre, President of the California Association of Winegrape Growers.
But “there is a lot of steel that is used in the vineyard to develop our trellis system” for the grape vines, Aguirre said, and the increase in steel prices as a result of U.S. steel tariffs has cost winegrape growers.
“For those growers who are at a point where they are looking to regrow their vineyards ... it makes the decision to develop that vineyard more difficult,” he said.
Farm bankruptcy data suggests those kinds of challenges are not existential for most California growers. As the U.S. Farm Bureau Federation’s chief economist noted back in November, family farm bankruptcy filings actually declined 41 percent in California and six other Western states in fiscal year 2018.
By comparison, the Midwest and other regions of the country that produce row crops and livestock saw an increase in farm bankruptcies. Soybean farmers, in particular, have been struggling as a result of Chinese tariffs and other market forces.
Sumner said several strong years of sales have provided some cushion for California’s nut and other specialty crops from the current trade turmoil. But there are many growers who “can’t lose that much money two years in a row,” he said.
California’s produce and nut crops, moreover, don’t have the shelf lives of row crops like corn or wheat. That means the industry will need to find markets for its 2018 crops, one way or another, in the coming months.
“If the tariffs impacts are prolonged, as an industry we’ll continue to find new and different homes for the products, we will have to,” said Connelly.