By Dan Bolton
Few Americans can assess the immense impact of tariffs on every Chinese import, but they will easily notice the difference between a $6 box of 100 teabags and one that sells for $7.50 (a price that does not include sales tax).
Import taxes could conceivably cost Americans $135 billion annually, a sum that envisions economic patriotism comparable to financing a major war.
The May 10 round of tariffs on $200 billion in Chinese goods is in effect. A final $325 billion round would impose import taxes of up to 25% on the remainder of the $539.5 billion of Chinese goods that Americans purchase annually. In contrast, China purchased only $120.3 billion worth of U.S. goods last year, including a small amount of coffee and tea (now subject to 25% Chinese tariff). American roasted coffee including solubles and concentrates have been subject to a Chinese tariff since September 24 when 10% was levied. That increased to 25% May 13 when China retaliated by listing an additional $60 billion of U.S. made goods.
The only products not on the latest list are pharmaceuticals, rare earth minerals, and some medical goods.
China currently imports only 1% of the world’s coffee, valued at $301.6 million in 2018. China exported $230.5 million worth of coffee in 2018, most of which is low-grade soluble and concentrates. Germany buys about 40% of the arabica produced in China. Purchases of U.S. coffee, which were on the rise in a market that buys 66% of its coffee roasted, ground or soluble, are likely to decline due to the retaliatory 25% tariff.
At the direction of President Donald Trump, the office of the U.S. Trade Representative invited public testimony prior to levying the latest round, setting a June 10 deadline for submissions.
The actual amount of the tariff has not been determined, only a range of 10-25%. All teas from China including flowering teas, concentrates, soluble tea, extracts, tea juice, and mate are named on the Harmonized Tariff Schedule (HTS). As the No. 2 tea supplier and the most important source of green tea, increasing the price of Chinese tea will be significant, but taxes on $30 billion in clothing; electrical equipment valued at $50 billion and $185 billion in computers and electronics will ultimately cost Americans a lot more in taxes. Shoe executives predict canvas sneakers will increase by $15 and running shoes and boots by $50.
As the June 17 public hearings near, tea industry and trade association leaders are making their case in writing and hoping for an opportunity to voice their concerns. The intent is to exempt tea, or at least minimize the import tax. If that fails, tariffs could be enforced as soon as June 24.
In the meantime, tea importers and blenders are speeding up shipments, stockpiling tea, substituting other origins (Japan, Indonesia and Vietnam, even India) for Chinese green tea and cautioning clients to brace for price increases and a difficult period of transition.