Supply chain radar: UK-Australia FTA damp squib – more spin over substance
A story of two divorces.
Weighed down by almost 50% tariffs, US cherry exports to China have fallen, but the pain for growers has been mitigated by a combination of lower volume and a resilient domestic market.
However, for air freight operators this year’s cherry season has been a setback.
US cherries took a heavy hit from the tariffs Beijing imposed on a number of US commodities, worth a total of $34bn.
Having slapped a 15% tariff on top of the existing 10% in early April, the Chinese government implemented a second round on July 2, which added a further 25% to the tally.
Chinese importers duly cut their orders: the volume of cherries shipped to China is down on last year as is the number of charters moving the stone fruit to this market, noted Chris Connell, senior vice-president, perishables at Commodity Forwarders.
US exporters sat down with their Chinese clients and made efforts to tighten margins, but they still faced the prospect of selling their cherries at a significantly higher price to Chinese consumers, Mr Connell said.
On top of that, they were experiencing delays as the Chinese authorities stepped up inspections of inbound shipments to enforce food safety regulations more stringently. These could add six to seven days to transit times, he added.
The blow would have been harder if the cherry crop had been on a par with last year’s exports. Adverse weather conditions saw the California crop fall from 9.7m cases to about 3m this year, and the crop in Washington state fell from over 24m crates in 2017 to under 20m.
But Mr Connell added: “It’s not a catastrophic problem. It’s a smaller crop, and the domestic market is taking more.”
Growers have also tried to boost exports to other markets, notably Korea and Australia.
“Korea has been a very strong market. It’s a more coveted market now than years ago,” said Mr Connell, while he noted that Europe had been less of a target, as it is well supplied with cherries from Turkey and Spain.
Still, the diminished demand from China has been a problem. The country accounted for about 20% of US cherry exports last year – “difficult to replace. There is no single market that’s going to take away the pain,” Mr Connell commented.
Cherries stand out owing to the sheer volume, but other US perishables are also facing headwinds from Chinese tariffs. US lobster shippers are worried. Last year China imported 55,500 tons, 7.4% more than in 2016.
And US beef and pork exporters have to find alternative markets. In November, JD.com committed to buying $2bn worth of meat from the US over three years.
China is not the only market where tariffs are raising barriers for US perishables. In response to Washington’s tariffs on steel and aluminium, Mexico reciprocated with levies on a range of goods including whiskey, pork and apples. The US neighbour took nearly 25% of US pork exports last year and was the destination for about 10% of the apple crop from Washington state, worth an estimated $200-250m.
The impact on shipping patterns to Mexico may go some way to reflect the true impact of tariffs on perishables exports. Cherry exports to China have been burdened not only with a steep rise in tariffs but also higher airfreight rates, Mr Connell pointed out.