LOS ANGELES – China and the U.S. continue racing toward one another in a game of economic chicken, as both promise to retaliate in a tit-for-tat trade war that shows no sign of ending before 2019.
That prospect has California farmers fearing they will lose long-standing customers, creating a glut for their commodities and lower prices.
"That is what people fear," said Karen Ross, California Secretary of Food and Agriculture. "If this goes on for a prolonged period of time we will lose significant markets that have been built but one relationship at a time over decades."
On Friday, China threatened new tariffs of 5 to 25 percent on roughly 5,000 U.S. products if the U.S. imposed new duties on $200 billion of Chinese imports.
The U.S. is looking to leverage its massive trade imbalance with China to convince the Asian superpower to reduce its aggressive tariff structure and stop stealing U.S. intellectual property. So far, neither side has backed down, and talks are at a standstill.
On Saturday, a determined President Trump tweeted, "Every country on earth wants to take wealth out of the U.S., always to our detriment. I say, as they come, tax them."
And while many farmers agree with the President on principle, some are too dependent on the Chinese market to absorb the losses. Already, China raised tariffs on a $2 billion of California agricultural imports.
"You name it, we grow it," said Ryan Jacobsen, director of the Fresno Farm Bureau. "California agricultural products are at the top of the list of commodities these foreign countries desire, including China."
California leads the nation in agricultural production, $46 billion to second place Iowa at $27 billion, and first in food processing, with 5,331 plants compared to New York, with 2,508.
Commodity Exports to China Tariff
(1) Pistachios: $530 million 45%
(2) Almonds: $518 million 50%
(3) Wine: $161 million 35%
(4) Oranges: $133 million 51%
(5) Dairy: $126 million 40%
(6) Grapes: $86 million 53%
(7) Walnuts: $78 million 65%
(8) Raisins: $29 million 50%
Source: California Food and Agricultural Department
"China buys 30 percent of the pecans grown in the U.S." said Blake Houston of Hamilton Ranches. "Even if they decrease by 10 percent, that affects directly the domestic market tremendously because now we have 10 percent or 13 tons of nuts. That oversupply is going to lower prices."
China is the state's third-largest export market after the E.U. and Canada. Here is a list of the largest agricultural exports to China after the latest round of tariffs.
"We need a resolution as quickly as possible," said Richard Marosi, director of the California Pistachio Growers Association. "No grower likes to see tariffs imposed."
Some see a political aspect to the nut tariffs, which impacts the districts of three vulnerable Republican congressmen – Rep. Devin Nunes, a close ally of President Trump, Rep. David Valado and Rep. Jeff Denham. Their San Joaquin Valley districts grow about 99 percent of U.S. pistachios.
Marosi said the full effect of the new tariff on pistachios won't be fully known until the new crop ships in October. Luckily, the only other major producer, Iran, had a deep winter freeze and production fell by 66 percent, leaving no nuts available for export.
So the question is will Chinese consumers still buy the nut at a significantly higher price.
"China represents a billion dollar market for us," said Jim Zion of Meridian Farms. "More than 25 percent of everything we produce goes there. We need to get this resolved as quickly as possible."
One reason why – it’s not just farmers who are effected – pickers, truckers, processing plants and ports are as well. China accounts for more than 50 percent of products that move through the ports of Los Angeles, Long Beach and Oakland.
China first imposed a 10 percent tariff in April, followed by 25 percent in July. Last week, however, it proposed a new round of tariffs of 5 to 25 percent on thousands of products from soybeans and liquid natural gas.
President Trump is hoping to bring the Chinese back to the negotiating table to cut the U.S. trade deficit. Instead, in state-run media, China said it is prepared for a "protracted war...Considering the unreasonable U.S. demands, a trade war is an act that aims to crush China's economic sovereignty, trying to force China to be a U.S. economic vassal."
Besides nut exports, the California wine industry expects to take a hit. U.S. wine exports to China rose 15 percent this year, according to the San Francisco based Wine Institute. China imposed a 35 percent tariff on U.S. wine in July, whereas Chile and New Zealand wines have a 0 percent tariff, as will Australia come January.