Apples and cherries are at stake in China trade fight

US trade moves could spark Chinese retaliation
US trade moves could spark Chinese retaliation

Washington apples and cherries are caught in the trade fight between the United States and China.

China's tariffs on about $3 billion worth of US imports, including 15% taxes on fruit, went into effect Monday. The Chinese trade penalty will especially punish Washington State, which ships more apples and cherries to China than any other part of the country.

Related: China hits the United States with tariffs on $3 billion of exports

"We're free traders," said Todd Fryhover, president of the Washington Apple Commission, a nonprofit group that promotes the industry. "Any disruption to that has a negative economic impact to our growers."

Gala, Red Delicious and Granny Smith make up 90% of the apples that Washington growers ship to China. The other 10% are more exotic varieties, including new types that the growers are testing.

"We get high dollar values for our products," Fryhover said.

Related: China may target American cherries, pistachios and sparkling wine

Last year, Washington growers sent nearly 1.8 million 40-pound boxes of apples to mainland China and another million to Hong Kong, according to data from the Washington State Tree Fruit Association. The shipments raked in $45 million to $50 million, and supported 1,260 jobs in the state.

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Washington apple orchard. Photo provided by the Washington Apple Commission.

China is an enticing market for American producers, explained Desmond O'Rourke, a retired professor of agricultural economics at Washington State University and an expert on the global fruit market. China has 1.4 billion people and a growing middle class able to spend on imported American food.

"The growth potential is what attracts everybody to China," he said.

Washington growers are vulnerable to protectionist policies because a third of apples grown in the state are sold overseas. Chinese tariffs on apples would raise costs for Washington suppliers — and could force them to hike prices for Chinese consumers to protect their profit margins.

Related: What happens when the world's two biggest economies turn on each other

That could make their apples less competitive for Chinese retail buyers and consumers than apples shipped there from Chile, France, New Zealand and Australia. China is also the world's largest apple producer, and its crop could become more appealing overnight.

For Americans, that means apple prices could fall. Washington growers may decide to sell more apples in the United States instead of shipping them to China, O'Rourke predicted.

O'Rourke said the harvest this September and October and competition from rivals will determine how much the tariffs will sting for Washington's growers.

Jim Bair, president of the US Apple Association, a national trade group, said last week that Chinese tariffs were the "latest chapter in a long and sad story where US apple growers get hurt in a fight we didn't start and in which we have no interest."

In 2015, the US Department of Agriculture reached an agreement with Chinese officials to fully open China to American producers after years of barriers on different apple varieties. Before 2015, growers could only export Golden Delicious and Red Delicious apples to China.

Then-Agriculture Secretary Tom Vilsack said at the time that the agreement would "result in high quality, fresh US apple varieties available for consumers in China and a significant boost in sales for American apple producers."

But O'Rourke said the Chinese appetite for Washington apples has failed to live up to producers' high expectations. China is a huge market, but only 5% of Washington apples go there. Mexico and Canada are the biggest importers.

Despite possible tariffs and sluggish growth, O'Rourke expects growers to continue selling in China. Restrictions "wouldn't be a death blow," he said.

The state's cherry growers may face a greater threat from higher taxes in China.

China is the largest importer of Washington's Bing and Rainier cherries. The country brought in nearly 3 million 20-pound boxes last year, and another 300,000 boxes were shipped to Hong Kong.

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Cherries on a conveyor belt. Photo provided by the Northwest Horticulutral Council.

Those cherries sold for an estimated $127 million, according to the Washington State Tree Fruit Association.

Cherries are a profitable business for both Washington growers and wholesale retailers in China. The online market for them is also growing.

"There's a lot of excitement," said Mark Powers, president of Northwest Horticultural Council, a growers' trade group in Yakima, Washington. "They love our cherries."

Powers said it was difficult to predict the impact of the tariffs, but "either the price to the consumer goes up or the return to the producer goes down." He hopes the United States and China would reach a solution before peak season begins in June.

While Washington's apple producers can redirect sales from China to other major markets, the state's 1,400 cherry growers depend on the Chinese market. And the country relies on American cherries because China's growing capacity is less developed than its apple industry.

"We can't just easily switch markets from China," Powers said. "There is no other market that can take that kind of volume."

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