President Trump: 'We have a big trade deficit with Canada.'
David Phippen’s almond orchards in Manteca are a few months away from harvest, the nuts still green on the trees. That gives him some breathing room before China's tariffs on almonds — California's largest agricultural export — and other crops really bite.
It also buys Republicans in Washington some time to defuse President Trump's simmering trade feuds with not only China, the target of an updated round of U.S. tariffs on Friday, but also top export markets Europe, Mexico and Canada.
If they fail, it could spark a far more serious backlash in traditionally Republican parts of the California, just weeks before the contentious mid-term elections in November.
"We're just about finished selling the 2017 almond crop," said Phippen, co-owner of Travaille and Phippen, a third-generation almond grower, packer and shipper. So "it really isn’t a big deal if China isn’t buying almonds from us today," he said. But "by the middle of October, when the new crop is coming in, we’re going to be real excited if China isn’t actively buying almonds."
That would create yet another political headache for Central Valley Republicans Jeff Denham of Turlock, David Valadao of Hanford and Devin Nunes of Tulare, who all face energized Democratic opposition as they seek another term in Congress. Democrats have already tried to attack the GOP incumbents for not pushing back against Trump trade policies.
Thus far, many influential industry leaders say they've been happy with their representation in Congress on the issue. "The congressmen that I know especially in the Central Valley, both the Democrats and Republicans, I think understand the potential impacts [of trade disputes] to agriculture," said Bill Lyons, a Modesto rancher and former California Secretary of Agriculture. Lyons said Denham, his congressman, has done a good job of representing the industry, a view echoed by Phippen and others. But if trade tensions rise, it will up the pressure on GOP lawmakers to break with the White House and and defend local interests.
The political implications of pushing back against the president, however, are tricky. Just ask South Carolina Rep. Mark Sanford, a frequent Trump critic, who lost his primary election in a race that became a referendum on the president. Even as they try to protect agribusiness, California Republicans risk turning off the conservative base, which might explain why they've been relatively quiet on trade thus far, at least in public.
It will be increasingly difficult to maintain that balancing act if the United States and its trading partners don't reach a detente. Trump's moves this spring to levy tariffs on China, Mexico, Canada and Europe have prompted those countries to hit back with tariffs of their own, many that would hit major California exports.
China has already responded to the White House's tariff announcement this morning by promising more duties on U.S. goods "of the same scale and the same strength.".
Almonds are just one of the state's leading agricultural products that China announced in April it would slap tariffs on. Wine, walnuts, pistachios, and table grapes — which rank second, fourth, fifth and sixth in export value — were also on the list of targeted U.S. goods. Grapes and nuts are both harvested in late summer through early fall, delaying the pain growers may feel.
According to the California Department of Food and Agriculture, China was the number one destination for California pistachios in 2016, and the second-largest destination for California almonds. And it's a growing market. "We think that market is going to double in the next ten years," Phippen said. The European Union was by far the largest export market for California almonds and walnuts and second-largest for pistachios.
Fortunately for the state's nut growers, the EU has not threatened tariffs on U.S. nuts. But it is preparing to raise duties on rice, another major California crop that is harvested in the fall.
Canada and Mexico, meanwhile, have announced new tariffs on yogurt and cheese, hitting California dairy farmers. And unlike other agricultural exports, dairy products are not seasonal, which means exporters will feel the pinch much sooner. Dairy production is "year-round," emphasized Rachel Kaldor, executive director of the Dairy Institute, which represents the state's milk and dairy processors, so there's a "year-round need to make sure we have markets for that production."
Others, however, can afford to be a little more patient. "What we’re hoping for is (Trump)’s just posturing for better renegotiated trade deals. I’m sure that’s what he’s doing," said Phippen, who voted for Trump in 2016 and says he continues to support the president.
In the meantime, California farmers have other, more pressing concerns. Labor supply and water storage are the biggest worries at the moment, said San Joaquin Farm Bureau Executive Director Bruce Blodgett, who praised Republicans in Washington for trying to address those problems. They are "huge issues that we’re actually finally have a chance to talk about" in D.C., Blodgett said.
As Phippen explained, trade is "one of the things we’re worried about, but it hasn’t hit us just yet."