US-China Trade War Results in 47% Tariff on US Pecans

US-China Trade War Results in 47% Tariff on US Pecans.jpg

US Pecans, along with other nuts of United States origin, received yet another tariff increase by the Chinese government on Friday July 6, 2018 due to what is quickly becoming the largest trade war in US history.

The Chinese government levied another 25% tariff increase to a list of US agricultural products, and US pecans were again listed, bringing the total tariff to a whopping 47%. This is yet another setback for the US Pecan industry who has worked diligently over the past decade to increase export markets for US grown pecans. China is the largest trading partner for In-shell US pecans and is quickly creating an appetite for shelled pecans as well.

In 2017 In-shell pecan export values increased to $303,641,000 which was a 30% increase over 2016, a more important fact was that a staggering 76.37% of these pecans were sold to China. This is important because the increased export values also help to drive domestic price increases. While the previous tariff increase had not, to date, decreased exports from the same time last year, many in the industry fear that this latest tariff may have more of an effect on US Pecan exports entering China.

The new tariff will more than double the current tariff. To put this in perspective a US Pecan exported to China before the trade war ensued would cost the Chinese pecan importer about $0.22 in tariffs assuming he or she paid the American pecan exporter $3.20 for the pecans bringing the total cost to $3.42 per pound.

US Pecan Tariff prior to China US trade ware

After the US China trade war ensued, Monday April 2, 2018 the Chinese government add a new 15% tariff onto the 7% tariff bringing the total tariff to 22% for Pecans of US origin. Under this new scenario Chinese pecan importers have been paying $0.70 in tariffs assuming he or she paid the American pecan exporter $3.20 for the pecans bringing the total cost to $3.90 per pound.

April 2, 2018 to July 5, 2018 - 22% Tariff on US Pecans

As the US China trade war heated up, on July 6, 2018 a new 25% tariff was tacked onto the 22% tariff bringing the total tariff to 47%. Under this new scenario Chinese pecan importers will now pay $1.50 in tariffs assuming he or she paid the American pecan exporter $3.20 for the pecans bringing the total cost to $4.70 per pound.

July 6, 2018 - 47% import tariff on US Pecans

In a matter of only 95 days or Just over 3 months the cost to Import US Pecans into China went from 7% to 47% or based on the scenario above the cost went from $0.22 per pound to $1.50 per pound. Most people in the pecan industry believe if this continues that the new cost will definitely have an impact on US pecan prices. The new tariffs have already had an impact on South African pecan prices.

Why are South African pecan prices affected by US Pecan tariffs? South Africa’s production is still relatively small, a little less than the quantity of pecans produced in the state of Texas. Once Chinese buyers learned of new tariffs placed on the largest supplier in the world, the US, Chinese pecan buyers immediately stopped buying pecans in South Africa. Based on the assumption that prices will be lower from the largest supplier in the world, it doesn’t make much sense to pay higher prices to a much smaller supplier. As well many of our Chinese contacts say that they have ample supply currently, so they can wait. Just before the latest tariff was placed on US pecans, prices in South Africa took a huge dive. While prices seem to have leveled out currently, offers are light from China. However, US buyers are  helping to stabilize prices. Domestic consumption in the US is increasing as well as consumption to the EU and other surrounding areas.

While the trade war between the US and China seems far from over, pecan growers and pecan buyers are waiting to see what is going to happen with pecan prices and both parties continue to watch the market very closely to see where pecan prices will go.