Tariffs and potential tariffs to come have caused some alarm for California farmers. The issues arising with tariffs from some of California’s key export areas could threaten key exports going to some of the state's largest trading partners.
“This was not a well thought out strategy on the part of the Administration. I’m not the only one saying this,” says Stanislaus State Business Economics Professor Gokce Soydemir, an expert in Central Valley economics and international trade.
Products from California find themselves exported to China, Mexico, Canada, the European Union, and many other places. One of the reasons the tariffs impact the Central Valley and California is because there are numerous products that California grows 99% of the nation's almonds, pistachios, figs, dates, grapes (raisins), kiwifruit, clingstone peaches, and walnuts.
1. Exports to California's leading trade partners are affected
For the California Farm Bureau, a careful eye is being place on the tariffs from China. China was the number 3 foreign market for California agricultural exports in 2016 with a total value of approximately $2 billion. According to the bureau, there are expectations that China might add 25 percent tariffs to the 15 percent imposed in April 2018.
“The current trade dispute is something we’re watching very closely, as the impact of tariffs on our agricultural exports could be significant,” said Josh Rolph, trade expert for the California Farm Bureau, in an email. “The biggest tariffs from China, our third largest export destination, could pose a significant threat to pistachios, almonds, wine, citrus, dairy, and many other California commodities. We send $2 billion worth of agricultural product to China.”
Additional attention is paid to trading partners like the European Union, Japan, and Mexico. The European Union was the top agricultural export market in 2016, followed by Canada, China, Japan, and Mexico.
2. Some crops facing tariffs are huge commodities to regional counties
On July 6, the bureau notes that pistachios will have tariffs at 45 percent, almonds will have tariffs at 50 percent, wine will have tariffs at 35 percent, oranges will have tariffs at 51 percent, dairy will have tariffs at 40 percent, and other crops like table grapes, walnuts, raisins, plums, lemons, cherries, and strawberries will face tariffs of 50 percent or more.
This is significant because April’s 15 percent tariff alone had the potential carry a large impact on a consumer’s purchasing power in China.
“Their purchasing power is a lot less than ours. 15 percent is huge. They’re going to cut back on consumption,” said Soydemir.
“The proportion of income spent on the goods is much higher for a Chinese consumer than someone living in the united states,” he added.
Commodities like fruits and nuts are key crops for California. In the 2016 agricultural crop report, almonds were ranked as a number two commodity and had an export value of $4.4 billion for the Golden State. In the region, Stanislaus County and San Joaquin counties had almonds listed as a top commodity on their crop reports.
According to the California Farm Bureau Federation, the 2016 total export value of almonds to China from California was $518 million. 12 percent of almond exports in California went to China in 2016, according to California Department of Food and Agriculture.
California exported $530.5 million in pistachios, $518.1 million in almonds, and $161 million in wine to China in 2016.
3. It takes away key markets for California producers
“We’re already seeing it. It’s not like it’s something that’s going to happen in the future. Wine is waiting in containers. Grapes are going bad because they haven’t found any buyers. The agricultural sector is already seeing the negative impacts,” said Soydemir.
Soydemir adds that exporting agricultural products is how many people make a living in California, and, according to Rolph, the tariffs could impact farmers and rural communities.
It’s also not a problem that farmers could avoid since the tariff is on United States exports and not California in specific. The government could develop subsidies to negate the effect of tariffs, according to Soydemir, however, those subsidies will come out of the consumer’s pockets.
An option like diversification is not necessarily feasible either. Rolph reasoned that the transition from one crop to another isn’t “practical, economical, or easy” for a farmer to do.
Soydemir reasoned that while it is possible to search for other markets for products like almonds, they would have to be big enough to compare the European Union and China. It was a rationale that resonated with comments from Rolph as well.
“There is enormous competition in the international marketplace, especially in China, where if we lose a buyer in China, another country’s goods could displace ours, leaving us with no destination for that product,” Rolph said in an email. “These tariffs threaten to take away these markets that can’t be easily replaced.”
4. Agricultural jobs could be on the line
“Our major income is agriculture. Jobs will be lost,” said Soydemir. “This area already has twice the rate of unemployment as nationwide unemployment. It’s a vulnerable area. It’s a disadvantaged region.”
“There will be a greater loss of jobs here in the Valley and a greater loss of income.”
Even though the tariffs will impact both large farms and small farms, the larger farms may be able to absorb some of the impacts. It’s the smaller farms that may not be able to absorb the “shock” that from the tariffs as easily, according to Soydemir.
He reasoned that the greatest impact may go toward unskilled or even part-time workers. These are the jobs he speculated would be the first to go as the areas deal with the impacts. As farmers become unable to move their product and lose income, they may have to start removing jobs.
“Obviously, the effect is not going to be immediate but over a year or two we’re going to start seeing these impacts,” claimed Soydemir. “It may actually push our economy into a full-blown recession.”
Organizations like the California Farm Bureau are urging the Trump Administration to work out a deal to avoid the impact of the tariffs. Additional work is being done with the United States Department of Agriculture for mitigation ideas if the tariffs are in place for an extended time.