From The Eagle's Nest

July 2018

Tariff’ic or Not - Part II?

Last month, I discussed some of the tariffs imposed on steel and aluminum and wanted to get everyone thinking about the effects (rather good or bad) that those may have on the industry. Aluminum and steel has been all over the news, but what hasn’t been is the retaliatory tariffs imposed by China on US fresh produce exports.

It comes as no surprise that China was none too thrilled with the tariffs on steel so on March 23, 2018, they announced their plans to impose an additional 15% tariff to exports of fruits, dried fruits, nuts and other produce. Chinese customs officials began levying these tariffs this past April. According to the Produce Marketing Association (PMA), the value of the US fresh fruit export to Mainland China and Hong Kong is USD $544.5 mil in 2017, making it the third largest importer of US produce behind only Canada and Mexico.

So, how is this going to affect us? Well, for starters you should see an increased amount of domestic produce on the shelves in the supermarket which means an increase in the amount of loads on the road. This surplus of produce traditionally drives down the price in some produce varieties as well. According to the USDA China Annual Fruit Report, the largest import categories were cherries (making up almost half of the total import value at USD $226 mil.), followed by citrus and apples (apples being the most popular fruit in China accounting for 6% of US global apple export).

Why haven’t you seen this on the news? It appears as though these new tariffs have had little to no influence on Chinese buying habits and with China representing only 4% of US Fruit and Nut exports, there has been inconsequential backlash from the new tariff. According to The Packer, “While fruit and tree nut exports to China generally represent a small percentage of total US exports in this category, China is viewed as a critical growth market for demand expansion.” So while growth in the Chinese market may temporarily slow down just a bit, there is really no need to worry at this point.

Just like steel, we don’t know just yet what these tariffs will mean long term or if they are even here to stay. We should continue see many more loads of domestic produce on the road this summer. Will the price of cherries and citrus drop? I don’t think there will be any significant change at the supermarket. Remember that even though there is surplus which typically drives the price down, the cost of transportation is still higher than in previous years so most savings will probably be eaten up in the cost of freight. Unlike steel, the only people I can see that will benefit from this retaliatory tariff will be US truck drivers. As long as no other countries hop on board with China in introducing new tariffs on our exports then we will be just fine.

Joey Holder, DML, CTL

Director-Satellite Operations & Corporate Development
Eagle Transportation, LLC.

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