Tariff Troubles
When the clock struck midnight on May 10 American consumers learned they would soon have to pay a 25% duty on Chinese manufactured goods.
The list of goods, valued at $200 billion, excludes coffee and tea for now. Tariffs are levied to punish China by making exports less competitive than goods arriving from other US trading partners.
In retaliation, China increased import duties on $60 billion worth of American products, a tariff that includes hikes to 25% likely to dampen purchases of US coffee and tea.
It is unknown what happens next.
The US administration directed the US trade department “to begin the process of raising tariffs on essentially all remaining imports from China.” Taxing all $300 billion worth of Chinese imports would escalate a trade war with serious consequences that sent stocks plummeting globally.
The leaders of both countries continue to negotiate and will meet in June at the G20 gathering in Japan.
In its latest retaliatory round, China named 2,493 American imports including roast and decaffeinated roasted coffee, flower tea, green tea (in certain amounts), oolong, and black tea as well as mate and numerous spices.
Rates on these goods rose from 5% to 25% in some instances. Tea and coffee were already being taxed at higher rates as of last fall. Now everything in the category will be taxed at 25%.
China ships very little coffee to the US but it is America’s largest supplier of green tea. The World’s Top Exports website, using data compiled from the US Department of Agriculture, lists China as the world’s top tea exporting nation with a crop valued at $1.8 billion in 2018. The US purchased $94.3 million of tea from China last year, up 1.2% since 2014. This number does not include a large amount of tea originating in China but imported from Canada which sells more than $1 billion worth of tea annually to the US.
China imported $301 million worth of coffee in 2018, about 1% of the global total. In contrast the US imported $5.7 billion worth of coffee, equal to 18.5% of global coffee imports.
The US earned $124 million from high-value tea exports in 2018, about 1.8% of the world total. During that period the US exported $861 million worth of coffee, about 2.8% of the world total, down 10.2% from 2017.
If the US goes through with its threat, Americans purchasing tea sold in bulk from China who previously paid $4.50 per pound will pay $5.63. The tariffs, if expanded, would mean importers must pay $250 in taxes for every $1,000 spent on tea. China has $2.5 trillion in reserves, money that could subsidize tea growers, who would then discount tea to retain market share.
Otherwise the outcome is clear. Vendors would find the rate plus tariff no longer competitive and likely buy their green tea from Japan, India, Germany, Sri Lanka, Indonesia, Thailand, and Vietnam.