Yakima Valley apple farmers brace for 20 percent Mexico tariff

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YAKIMA HERALD – MIA HOANG – YAKIMA, Wash. — Red Delicious apples have fallen out of favor with U.S. consumers, but they’re still popular in Mexico.

Export markets, such as Mexico, are crucial as the once-popular variety still makes up roughly a quarter of apples — tens of millions of boxes — grown in Washington state.

That Red Delicious market — and the overall exports of Washington state apples to Mexico — will take a major hit now that Mexico has imposed a 20 percent tariff on apples.

Mexico announced tariffs on apples and other U.S. farm goods Friday, shortly after President Donald Trump said he was placing tariffs of 25 percent and 15 percent, respectively, on steel and aluminum imports from several countries. The Washington Apple Commission confirmed the 20 percent Mexican tariff rate on U.S. apples on Tuesday.

Higher prices

The new tariff on apples and other products will likely prompt importers in Mexico to pass the tariff on to consumers by increasing prices, said Victor Ratia, who oversees Mexican apple sales for Washington Fruit in Yakima. Importers have already seen rising costs due to the weakening peso against the U.S. dollar — and the currency may devalue further in response to the ongoing trade dispute between the two countries.

It’s uncertain how much prices will increase, Ratia said. He plans to be in close contact with retail and wholesale customers in Mexico to evaluate the tariff’s impact over the next several days and how Mexican shoppers respond to rising prices.

“If the sales decline is significant, we’re going to have to look at alternatives,” he said. That may mean shipping apples to other countries or even other parts of the U.S.

One silver lining, at least with apples, is that the tariff arrived at the end of the shipping season for the 2017 crop — about 80 percent of this season’s Washington apples already shipped. Just more than 135 million 40-pound boxes were harvested last fall, according to estimated figures as of early May from the Washington State Tree Fruit Association.

Response

Mexico’s announcement surprised few in the apple industry — many expected it when Trump announced plans in March to apply tariffs on steel and aluminum imports from several countries.

Apple industry officials and the state’s congressional delegation hoped the Trump administration would reconsider. U.S. Rep. Dan Newhouse, for one, voiced concerns about retaliatory tariffs on the U.S. several months ago. The Republican from Sunnyside warned of “negative unintended consequences” of the Trump administration’s decision in a March 7 news release.

In an emailed statement Tuesday, Newhouse said he was not surprised at Mexico’s announcement and he would keep pressing the Trump administration about the negative impact of tariffs on the state’s agriculture industry.

“A trade war with Washington’s agriculture trading partners and America’s closest allies is not in anyone’s interest,” Newhouse wrote Tuesday. “The administration must recognize the necessity of preventing retaliation on American producers by continuing to negotiate with our trading partners for a solution that ensures a fair and equitable trading relationship.”

Shipments

But the tariff is still a blow to an otherwise successful export season to Mexico. About 10 million 40-pound boxes of apples have shipped to Mexico this season, about 13 percent more than what was shipped as of this time last year. Exports were on track to reach 15 million boxes, a goal that might be out of reach with the tariff.

That would have been on the higher end of the 12 million to 15 million box range typically shipped to Mexico annually, said Todd Fryhover, president of the Washington Apple Commission. That’s roughly 10 percent of all apples grown in the state. The value of those exports is estimated at $200 million to $215 million.

But it’s not just the volume of apples exported that makes Mexico such a crucial market. Mexico “takes Reds, Goldens, Galas,” Fryhover said, referring to different apple varieties. “It takes all sizes, it takes all grades. It’s a very dynamic marketplace.”

And finding a home for those Red Delicious apples may get even tougher, said Ratia, of Washington Fruit. The second highest export market for Red Delicious apples behind Mexico is India, which also is considering retaliatory tariffs on apples.

“We’re having fewer and fewer options in the export arena for Red Delicious,” he said.

This, however, isn’t the first time the state’s apple industry has been impacted by a trade dispute with Mexico. In August 2010, a 20 percent tariff was imposed on apples as retaliation for the U.S. restricting the flow of long-haul Mexican trucks. That tariff came at the start of the apple harvest and lasted for more than a year.

Outlook

Based on the resolution of past disputes and long-standing relationships with retail and wholesale customers, Ratia believes his company and others in the apple industry can weather this latest trade setback.

“We’ve had other disputes and other uncertainties, but somehow we manage to continue exporting,” he said. “Obviously this is not a desirable situation. But Mexico is a mature market and a major trade partner. The dust will settle.”

But it may be some time before that happens. Mark Powers, president of the Northwest Horticultural Council, a Yakima-based organization that represents the tree fruit industry on policy issues, said he expects these tariffs to stick around for now.

“Right now, it looks like it’s turning to a protracted legal fight,” Powers said in a phone interview from Washington, D.C. Tuesday.

Powers said he will make another trip to Washington, D.C., next week with growers and other industry officials to speak specifically on trade issues.

“The work on (trade policy) has been ongoing since March, when the first skirmish occurred,” Powers said, referring to Trump’s initial announcement. “We add Mexico to the list of countries that have retaliated. The economic impact is growing. We’re making that known to both the (Trump) administration and members of Congress.”

Posted By: Mai Hoang, Yakima Herald, June 5, 2018

Picture: Shawn Gust – Yakima Herald

Source: WSFB