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Sweet cherries are among the agricultural industries expected to experience economic losses due to new trade tariffs, according to UC Agricultural Issues Center report. In 2016-17, $145 million of sweet cherries were exported to China and Hong Kong.
Sweet cherries are among the agricultural industries expected to experience economic losses due to new trade tariffs, according to a UC Agricultural Issues Center report. In 2016-17, $145 million of sweet cherries were exported to China and Hong Kong.


August 15, 2018 - By Pamela Kan-Rice - The ongoing international trade turmoil between the U.S. and other countries has prompted import tariffs on many U.S. agricultural commodities in important export markets, which could hurt U.S. farmers.

A new report released by the University of California Agriculture and Natural Resources' Agricultural Issues Center estimates the higher tariffs could cost major U.S. fruit and nut industries $2.64 billion per year in exports to countries imposing the higher tariffs, and as much as $3.34 billion by reducing prices in alternative markets.

“One way to mitigate the impact of the tariff impacts would be to offer assistance to shift the products to completely new markets where these displaced commodities could be delivered without causing price declines,” said co-author Daniel A. Sumner, director of the UC ANR Agricultural Issues Center and UC Davis professor in the Department of Agricultural and Resource Economics. 

California's almond industry stands to lose about $1.64 billion due to trade tariffs.
California's almond industry stands to lose about $1.64 billion due to trade tariffs.

When nuts and fruits are diverted back into the remaining markets for their crops, Sumner and co-author Tristan M. Hanon, a UC Davis graduate student researcher, expect farmers to lose revenue from lower prices.

The agricultural economists foresee major losses for many commodities caused by diverting the produce from high tariff countries to sell in the remaining markets.

Almonds alone could lose about $1.58 billion and pistachios could lose about $384 million, according to Sumner and Hanon.

The authors looked at the impact of tariffs on almonds, pecans, pistachios, walnuts, apples, oranges, raisins, sour cherries, sweet cherries and table grapes. All 10 nuts and fruits are perennial crops, growing on trees or vines, so growers cannot easily change their production quantities or plant a different crop. 

The U.S. exports 14 percent of its pistachios to countries imposing the new tariffs.
Pistachios could lose about $385 million as a result of new tariffs, according to the Agricultural Issues Center study.

The U.S. exports 13 percent of its almonds, 14 percent of its pistachios and 22 percent of its pecans to countries imposing the new tariffs. China and Hong Kong are major export markets for U.S. fruits and nuts. In 2016 and 2017, China and Hong Kong spent over $500 million to buy 40 percent of all U.S. almond exports, and nearly $600 million for most of the exported pistachios. Some of the exports to Hong Kong are transshipped to other markets, but most of it stays in the China market. 

The new tariffs apply to all ten crops that are exported to China. “We consider most of the exports to Hong Kong with China because we understand that most of the U.S. fruit and nut exports to Hong Kong are destined for China,” Sumner said. 

To avoid paying tariffs, there are clues that Hong Kong's open market is the entry point for nuts ultimately shipped to China, in what Sumner calls “leakage.”

“The 7 million people in Hong Kong would have to eat 20 times the pistachios consumed by people in other countries if they aren't sending them on to China, the Philippines and other Asian countries,” Sumner said. “China turns its back on leakage, but those commodities may be vulnerable if China decides to crack down.” 

The U.S. exports 22 percent of its pecans to countries imposing the new tariffs.
The U.S. exports 22 percent of its pecans to countries imposing the new tariffs.

After the Trump administration imposed tariffs on an additional $16 billion worth of Chinese goods, China announced duties on $16 billion of American goods. Another round of new tariffs has now been scheduled.
Source: UCANR

In India, Mexico and Turkey, new higher tariffs apply to selected fruit and nut products. India, which buys roughly half of all exported U.S. almonds, applies new tariffs to almonds, walnuts and apples. Turkey's new tariffs apply to almonds, pecans, pistachios and walnuts. Mexico's tariffs target apples, for which the country paid about $250 million last year.

U.S. Secretary of Agriculture Sonny Perdue announced up to $12 billion in federal aid to farmers to soften the impact of tariffs.

“The U.S. government could purchase the commodities that would have been exported,” Sumner said. “Of course, the produce must be diverted from remaining markets to new market channels to avoid driving down prices.”

The full report “Economic Impacts of Increased Tariffs that have Reduced Import Access for U.S. Fruit and Tree Nuts Exports to Important Markets,” along with details on data, sources and methods, can be downloaded for free at the UC Agricultural Issues Center website at http://aic.ucdavis.edu.
Source: UCANR