The US recently raised tariffs on $200 billion in Chinese goods, and China retaliated by raising tariffs on $60 billion of American products. This back and forth between the two countries has Washington business owners nervous. Microsoft, Amazon, Boeing, Starbucks, and Costco are some of the largest companies on earth. With tens of billions in revenue they are the tech, retail, and aerospace backbone of the Washington economy. But Washington is more than just airplanes and lattes. It ranks #1 in the US for production of red raspberries, apples, hops, sweet cherries, pears, and Concord grapes. Agriculture accounts for 13% of Washington’s economy and over 164,000 jobs. China is the state’s largest international trade partner, importing over $620 million in Washington agricultural products. The question on everyone’s mind is, what effect will this trade war have on Washington’s growers, and who will ultimately pay the price?
Beer and Wine
Washington is home to over 400 breweries. These breweries can and keg their beers and ciders, but with China raising the cost of aluminum by 10%, and steel by 25%, small local brewers are seeing their costs rise as well; about one cent per can and even higher for kegs and specialized brewing equipment. For a small brewery that produces over $200,000 worth of canned beer on any given year, they’re looking at an unexpected cost of $20,000. And it’s not just the beer that is hurt by these tariffs. Yakima Valley produces 77% of the total US hop crop, and with the costs of beer making increasing, Yakima growers are seeing the demand for their hops wane.
Washington winemakers are in a similar boat. With nearly 500 licensed wineries and over 350 grape growers, Washington state is the second largest producer of wine in America. In 2017 Washington’s wine makers sold China $1.16 million worth of wine. This was up nearly 30% from the previous year according to the Washington State Wine Commission. Exports to China represented a small but rapidly growing percentage of their business, but the duties now total 91%, making the cost of the bottle on the shelf prohibitive. According to the Washington Wine Institute China doesn’t impose tariffs on other key wine growing nations, which gives Italy, Spain, and Australia a leg up just as the Chinese market was getting a taste for Washington vintages.
Fruit and Vegetables
More than $700 million in potatoes grown by Washington state farmers are now exported to 50-plus countries, with China as one of the largest markets. But with China adding a 25% tax on all American fruit and vegetable imports, farmers are seeing what was once a burgeoning market, dwindle to almost nothing. Auvil Fruit Company, a 90 year old Washington family-owned business, is being squeezed by the tariffs, losing more than $2 million in profit just last year. Washington’s total apple exports are down 28%. In 2017 China imported $128 million worth of Washington cherries, but with the added tariff of 25%, local growers are experiencing a down year, which is forcing them to cut labor costs by cutting hours or eliminating jobs altogether.
The seafood industry has ridden the economic waves for generations. Prices of fish, oysters, and crab fluctuate, but this trade war may prove to be different. The growing Chinese middle class has an appetite for US seafood imports. About $3 billion worth of Chinese seafood imported into the United States is now subject to a 25% tariff, and to retaliate, China imposed an equal tariff on US seafood. Much of the Alaskan fishing companies are based out of Seattle’s Fisherman’s Terminal. The Port of Seattle, which owns and operates Fisherman’s Terminal, says that 72% of the fish caught are exported, with the bulk of it heading to China. Companies like Aqua Star, Tri Marine International, and American Seafoods have a combined revenue of over $2 billion, and yet their products will now be subjected to a 25% tariff, a cost passed through to the consumer. This will force Chinese importers to either pay the higher prices, or find lower priced seafood from other countries. Experts and business owners wonder what will happen once the Chinese market finds a taste for non-US products.
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