For the first time since the country’s founding, U.S. consumers will pay a 10% tariff on Chinese tea beginning Sept. 1.
Import fees for processed tea packaged for retail and the packaging itself (tins and ornate storage containers) normally incur a charge but tea in bulk is considered a raw agricultural product under the new rules ― unless it is grown in China.
The rule applies to all Chinese green tea except for black tea in bulk. Chinese black tea in packaging exceeding three kilos will not be assessed a 10% tariff.
This spring the Trump Administration announced a $300 billion fourth round of import taxes that would tax virtually every Chinese product imported into the U.S. That threat was later suspended as negotiations proceeded. During the lull, tea industry representatives sought to exempt Chinese tea but were unsuccessful in removing green tea from the U.S. Trade Commission’s List 4 which contains 3,805 subheadings covering consumers goods. These include coffee and tea. In August the Administration, displeased with the progress of talks, announced the tariffs would begin Sept. 1.
The Administration delayed until Dec. 15, 10% tariffs on cell phones, computers and laptops, clothing and shoes.
“We are sad that it is happening,” writes Michael Harney, v.p., Harney & Sons Fine Tea, “Over the 20 plus years I have been going China, one could see a problem coming. China growing and feeling its oats. Tea was an original item of trade. Now it is insignificant. Since we are insignificant, we have little impact. So, we can only dodge the elephants as they fight,” he writes.
“We are already paying 25% on packaging items from China. We have brought in extra tea already. However, over time our costs will go up,” he writes, noting that tea “is a competitive market, so our ability to pass on costs are limited.”
“The U.S. tea industry is caught up in something bigger and stands to suffer because of it,” writes Jason Walker, marketing director at Firsd Tea, the New Jersey division of Zhejiang Tea Group, the world’s largest exporter of green tea. To meet the challenge “Firsd Tea is working to: (1. adding further supply of high-priority teas in our U.S. warehouses, with containers on the water and others scheduled to depart prior to Sept. 1, and (2. provide alternative or flexible options to our customers on a case-by-case basis, including contract purchases with locked-in pricing and reserved quantities.
Austin Hodge, an importer of Chinese tea, writes that “throughout our history, there has never been a tariff on tea. A tax on tea supplied to us by the East India Company sparked the revolution. For the first time, a tax on tea has been threatened by the Trump administration.”
How will it affect the American market?
“America is a very large importer of tea but the majority of our tea comes from South America and Africa and more recently, Vietnam,” writes Hodge, founder Seven Cups Fine Chinese Tea. “America loves cheap tea, and along with Germany, has put a lot of focus and energy into flavoring and blending to make it palatable. Chinese tea is really a minor player in the American market. The majority of Chinese tea imported into the U.S. is very cheap to begin with. Cheap tea will be easily replaced from other sources, and if not, it won’t be missed,” he writes.
Eliot Jordan, tea master, Mighty Leaf tea writes that “to keep tea alive, everyone in the chain will have to absorb some pain: the producer, the exporter, the importer, the blender, the packer, the brand, the grocer, etc. I expect most parties will grit their teeth and hold fast at first — but if the tax looks permanent it’s going to have to be worked into the final price to the consumer.”
“For specialty China teas, I don’t know where people will turn – there are just too many unique types from this origin. I hope customers will understand that the tariffs are a tax paid by American companies that bring tea to the USA market – it’s not paid by the Chinese. Tea is the national drink of China, it’s beloved in America, and it should be traded freely and enjoyed in a spirit of international connection, not conflict,” writes Jordan.
Aaron Vick, senior tea buyer, The G.S. Haly Company, writes that “The G.S. Haly Company has been working to mitigate the impact of this trade dispute on our customers since its inception in June of 2018 when the initial list of tariffs was enacted. First and foremost, we continue to rely on our suppliers in China to ensure that our quantity and quality requirements remain a top priority ahead of any changes in the tariff schedule.”
“As the situation grows increasingly dynamic, we are communicating with representative trade organizations, reviewing our inventory position, and maximizing available warehouse space to prepare for future impact. These actions will help mitigate the impact of these punitive tariffs, the additional costs of storage, financing, shipping and the tariffs themselves, but still represent a small portion of the overall cost that we have incurred to maintain our stock, source relationships, and quality standards,” he writes.
“The issue is highly volatile, and fully dependent on the ongoing trade negotiations between the United States and China. All tea traders in the U.S. are in the same position and navigating the situation as it continues to unfold. The bottom line is that teas from China will carry a notably higher price when imported under these new tariffs. Changes in supply and demand are likely as a result,” he writes.
“We hope this will cause people to give more consideration to other tea origins now that pricing will be more competitive. They have so much to offer and are so often overlooked in a knee-jerk response to choose the cheapest option which has historically been China teas, writes Vick.