Tariff relief from Japan amid China trade war

California’s citrus industry will benefit from Japan cutting tariffs on 90% of all U.S. ag products

Kaitlin Washburn  @kwashy12

EXETER – Japan recently agreed to cut tariffs on agricultural and industrial products from the U.S. under a new deal between the two countries.

The agreement, which was announced by President Donald Trump and Japanese Prime Minister Shinzō Abe in late September, comes as the agriculture industry continues to suffer during a trade war between the U.S. and China.

The deal will assist many California crops, especially citrus. Casey Creamer, president of California Citrus Mutual in Exeter, said this removes the competitive disadvantage citrus faced in Japan with other global producers.

“The Japan agreement is very good for citrus and I’m glad the Trump administration took this up and got the citrus industry back in the game,” Creamer said.

The deal will benefit more than just citrus. Tariffs on over 90 percent of food and agricultural products from the U.S. to Japan will either be reduced or eliminated, according to a fact sheet from the Trump administration.

Under the trade deal, each commodity was negotiated separately, so tariff reductions will vary crop to crop.

The agreement will immediately eliminate tariffs on almonds, walnuts, blueberries, cranberries, sweet corn and broccoli. Tariffs will be eliminated in stages for products such as oranges, cheeses, processed pork, poultry and wine, according to the fact sheet.

Currently, the citrus industry’s exports to Japan face a 32 percent tariff rate. In 2020, when the agreement comes into effect, that percentage drops to 25. That rate will decrease each year until it reaches zero in 2027.

While there might be a slight increase in exports, Creamer said the trade deal does more to stabilize the citrus industry’s market in Japan and prevent any future losses.

Fifty percent of Tulare County’s exports are oranges, and Japan takes 16 percent of them, according to the county’s 2018 crop report. The U.S. citrus industry in 2018 shipped 48,366 metric tons to Japan, which was a substantial decrease from 2016’s export of 70,366 tons of citrus.

Japan was motivated to take the deal after President Donald Trump threatened to impose tariffs on Japanese automobiles and auto parts, according to an article from Politico.  The agreement doesn’t require congressional approval, but does await ratification from Japan’s legislature. The agreement is intended to come into effect on Jan. 1, 2020.

While this deal is certainly a benefit for citrus, it doesn’t do anything to alleviate the effects of the trade war between the U.S. and China, Creamer said.

“We’ve definitely been impacted by the retaliatory tariffs from China. Last year, navel orange exports to China were down 36 percent,” Creamer said. “This was the worst season we’ve ever had, and while there are other reasons for that, the ripple effect from China was a significant one.”

Some of the citrus that usually heads to China was diverted to food banks, under trade mitigation programs. The rest crowded into other marketplaces and flooded domestic markets, Creamer said.

While the impacts of the U.S. and China trade war continue to hurt the ag industry, a tentative agreement between the two countries was reached last week that could be beneficial for farmers.

One part of the deal is a commitment from China to buy $40 to $50 billion worth of American agricultural products each year, according to a The New York Times story.

Creamer said while many of the details are still unclear, it seems like the potential agreement would be promising for the citrus industry, assuming China drops the retaliatory tariffs.

“We are waiting for the details and to learn more about what does it mean exactly for citrus,” Creamer said. “If the retaliatory tariffs come off with this deal, that’s great, but if not it doesn’t do anything for us.”

That commitment would be a major increase over China’s previous annual purchases. Before the trade war, China spent $24.3 billion on U.S. agricultural products in 2017, and exports to China peaked in 2016 at $25.5 billion. In 2018, amid the trade war, exports dipped to $13.4 billion, according to the American Farm Bureau.

Details are still unclear on the tentative deal, like how the $50 billion figure was decided and which products would be purchased under the agreement. American officials are still working on completing an initial agreement with China.

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