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What Chinese Tariffs Targeting American Crops Will Mean For Farmers

Apr 2, 2018
Originally published on April 2, 2018 7:01 pm

Today, the Chinese government announced tariffs on 128 American products, including food. Pork will be taxed 25 percent, and wine, dried fruit, and nuts are now subject to a 15 percent duty.

The announcement comes in response to the tariffs President Trump recently imposed on steel and aluminum. Trade officials from each country are negotiating, and it's not yet clear how long the duties will be in effect, or what the lasting impact will be for American producers and growers.

But for businesses who already have shipments in transit, there are immediate effects. NPR's Mary Louise Kelly spoke with someone whose business is already feeling the tariffs directly. Jim Zion, managing partner at Meridian Growers in Fresno, Calif., distributes almonds, pistachios, and pecans to markets like China.

Questions and answers have been edited for length and clarity.

How many nuts does California sell to China?

In any given year, California exports anywhere between 60 to 70 percent of its almonds, pistachios, and walnuts. Arizona exports about the same amount of its pistachios and pecans. China has been one of the largest markets for the last few years. At one time, one out of every four pistachios grown in California was destined for China.

How big a deal will this 15 percent tariff be for your business?

For anything that we were shipping, that's what we call "on the water" — in transit to China — we will have to ask our buyers how they would like to handle the additional cost, because obviously this wasn't factored in when we made the original contract.

Either we're going to have to give them a discount to cover this additional cost, or, if we can't come up with an agreement, we will divert those containers to another destination that doesn't have a tariff. If we can't do that, we'll have to bring them back. Regardless, this will definitely cost us some money out of our pocket to take care of these issues.

Do you have an estimate for how much money this will cost?

Pistachios today are selling for about $3.50 a pound on a wholesale basis. So 15 percent of that would be around $0.50 a pound, which, in a container of 44,000 pounds is about $22,000.

If we have to divert that load to another destination, that could cost us anywhere from $2,000 to $4,000.

And if we have to bring it back, anytime we bring a container back to the United States, by the time we bring it back and go through customs and everything, that additional cost could be $10,000. So out of pocket this could cost us anywhere from $5,000 to $25,000 per container.

And you're describing not just an economic cost but a bureaucratic hassle, having to renegotiate deals you thought were done.

Exactly. We've been doing business with many of our customers for many years, so we'll be able to work through this, but this is something that neither one of us wants.

We're being optimistic that this will not last forever, and at some point a settlement on this trade dispute will be negotiated, so we can get back to doing business, which is what all of us want to do anyway.

You work with growers across California's Central Valley — what are you hearing from them?

They're concerned. We were concerned when we found out about the steel and aluminum tariffs.

Typically, in trade disputes, the first round hits what I call specialty crops — dried fruits and nuts is what affects us — they tend to be easy targets. We tend to be the first victims in any type of trade dispute, and once again, that's proven to be correct.

You're saying, pardon the pun, but you're low-hanging fruit.

Exactly, we are considered a nonessential low-hanging fruit. And we kind of knew this was coming — we were hoping it wasn't, but there's not a lot we can do about it.

To what extent, in your view, are politics part of this? There's been a lot of talk that perhaps these tariffs are designed to hit at areas of the country that have been home to a lot of Trump supporters.

Politics play a huge part in it. If you look at the Central Valley, it tends to vote Republican, and it's home to some of the largest production of almonds and pistachios in the United States. So it's no coincidence that they hit dried fruits and nuts.

I wonder what you might say if you could lean down and whisper in the president's ear?

Unfortunately, crops and agriculture tend to be the pawns in this, and I would say, we can't be. This is our business. So much of what we do goes overseas, we need a coherent trade policy that allows us to do business, allows our customers to buy the product that we have. That's what we want, that's what we need and that's what we're looking forward to: a coherent trade policy in which we can plan going forward.

We plant these trees, and these trees will last 25 years — pistachios will last hundreds of years — so we need long-term stability in these marketplaces.

I understand you're also working the phone to China today. What are you hearing from your contacts there?

They knew it was coming, they were hoping it wasn't going to happen, and at this point we're trying to wait and find out — is this really going to stick, or is it going to be 24, 48, 72 hours and they go "OK, we negotiated a settlement?"

Honestly, the next 24 hours is going to be critical. We actually have containers arriving in Asia within the next seven days, so I've gotta make some decisions.

And the decision you have to make in the next 24 hours is whether or not to divert that shipment and send them somewhere else?

Divert, renegotiate the contract, or bring back, those are the decisions I have to make.

If China doesn't get almonds and pistachios and pecans from the U.S., where would they get them from?

Well, pistachios are grown in Iran, and they will probably pick up their needs from Iran. Australia has been planting a lot of almonds lately, with the worldwide demand. And pecans, you can get pecans from South Africa and Australia.

So the bottom line is our customers do have alternatives. They would prefer buying from California, but if the costs are too high or too restrictive, they can switch to another producing country.

Menaka Wilhelm and Sam Gringlas contributed to this report.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

MARY LOUISE KELLY, HOST:

Now we're going to talk to someone who will feel the impact of these new tariffs. Jim Zion is a managing partner at Meridian Growers in Fresno, Calif. His company distributes almonds and pistachios and pecans from growers across California's Central Valley. And Jim Zion was planning to spend today celebrating his wife's birthday. That changed when he heard the tariff news. So now we have caught him at the office at Meridian Growers. Hey there, Jim.

JIM ZION: Hi. How are you?

KELLY: I am well. Thank you. Sounds like you had very different plans for today until this tariff news broke.

ZION: Yeah, today was going to be a normal day - spend a little time with my wife and come into work, get caught up from being gone for a little bit. And things have definitely changed.

KELLY: And how big a change is it? I mean, how big a deal will this be for your business?

ZION: This will be a very large impact. We do quite a bit of business into China and Hong Kong. And these tariffs that were announced will definitely change the dynamics in that marketplace.

KELLY: When you say you do quite a bit of business with China, how much? I mean, how many nuts does California sell to China?

ZION: In any given year, California exports anywhere between 60 to 70 percent of its almonds, pistachios and walnuts. China has been one of the largest markets for the last few years. At one time, 1 out of every 4 pistachios grown in California was destined for China.

KELLY: And the tariffs announced today - 15 percent - what will the impact be on your bottom line?

ZION: Well, for us, we will have to - for anything that we were shipping that is what we called on the water - in transit to China - we'll have to ask our buyers how they would like to handle those additional costs because obviously this wasn't factored in when we made the original contract. So either - we're going to have to give them a discount to cover this additional cost they hadn't planned on. If we can't come up with an agreement then, we will either divert those containers to another destination that doesn't have a tariff. Or if we can't do that, we'll have to bring it back. But regardless, this will definitely cost us some money.

KELLY: Do you have any sense of how much? Can you give me any kind of estimate?

ZION: Well, typically pistachios, for instance, today are selling for around $3.50 a pound on a wholesale basis. So 15 percent of that would be around 50 cents a pound, which in a container of 44,000 pounds is about $22,000. If we have to divert that load to another destination, that could cost us anywhere from $2,000 to $4,000. And if we have to bring it back - any time we bring a container back to the United States, by the time we bring it back and go through customs and everything, that additional cost could be $10,000.

KELLY: To what extent, in your view, Jim, are politics part of this? There's been a lot of talk that perhaps these tariffs are designed to hit at areas of the country that have been home to a lot of Trump supporters.

ZION: Politics play a huge part in it. If you look at the Central Valley - tends to vote Republican. And a lot of the congressmen are in leadership positions - Kevin McCarthy, for instance, down in Bakersfield. Bakersfield and his district is home to some of the largest production of almonds, pistachios in the United States. So it's no coincidence that they hit dried fruits and nuts.

KELLY: I wonder what message you might have if you could lean down and whisper in President Trump's ear right now.

ZION: (Laughter) Well, I would say this is our business. So much of what we do goes overseas. We need a coherent trade policy that allows us to do business, that allows our customers to buy the product that we have. That's what we need, and that's what we're looking forward to.

KELLY: Jim Zion, if China doesn't get almonds and pistachios and pecans from California or from the U.S., where would they get them from?

ZION: Well, pistachios are grown in Iran. The bottom line is our customers, our consumers do have alternatives. They would prefer buying from California. But if the costs are too high or too restrictive, they can switch to another producing country.

KELLY: I understand you're also working the phone to China today. What are you hearing from your contacts there?

ZION: They knew it was coming. They were hoping it wasn't going to happen. And at this point, we're trying to wait and find out, is this really going to stick, or is it going to be 24, 48, 72 hours and they go, OK, we're - we've negotiated a settlement? Honestly, the next 24 hours is going to be critical. We actually have containers arriving within the next seven days I've got to make some decisions on. So we're in contact with them on a constant basis as we get closer to that drop-off date that they actually arrive there in China and Hong Kong in those ports there - what is going to be the final decision.

KELLY: Jim Zion, thank you.

ZION: You're welcome. Thank you so much.

KELLY: That's Jim Zion, managing partner at Meridian Growers in Fresno, Calif. Transcript provided by NPR, Copyright NPR.