The Trade Numerologist: Discord in (Real) Apple Markets
As it had threatened, China has imposed new import duties on $3 billion worth of U.S. imports, including a 15% tariff on fruit, to retaliate for U.S. tariffs on steel and aluminum.
The move exacerbated trade tensions between the two superpowers, which could get worse after the U.S. announces new tariffs on some 1,300 Chinese products, totaling around $60 billion, likely triggering another wave of retaliatory tariffs.
The new Chinese taxes threaten to choke growth in a key part of U.S. fruit trade, the U.S.’s apple industry, worth an estimated $4 billion a year. In the U.S., two-thirds of apples are sold for eating whole, with the rest going to make juice, sauce and other apple-based foods.
Apple production can be fickle, depending on climate, disease and availability of labor, but the U.S.’s 7,500 apple producers have been increasing exports since the turn of the century. Growers credit the North American Free Trade Agreement, and the opening of other markets around the world.
U.S. apple exports, 1999-2017
|1999: 648.9 million kg|
|2002: 596.4 million kg|
|2005: 690.2 million kg|
|2008: 712 million kg|
|2011: 833.4 million kg|
|2014: 888.4 million kg|
|2017: 911.7 million kg|
The U.S.’s top two buyers are its NAFTA partners, Canada and Mexico. China is only its tenth biggest market. Earlier this decade, China banned some imports from Washington state, the nexus of U.S. production, because of concerns over disease, but it lifted those restrictions, and U.S. apple growers had been looking forward to making more inroads in the world’s biggest market.
“As the middle class grows in China, consumers are anxious to try new taste profiles, and the U.S. wants to accommodate them,” Jim Bair, president of the U.S. Association, writes me in an email. China grows mostly Fuji apples, so there’s demand for U.S. varieties like “Red Delicious, Granny Smith and Gala,” Mr. Bair explains.
In a recent editorial in the Wall Street Journal, Mr. Bair noted that total U.S. agricultural exports to Canada and Mexico have quadrupled in real terms since the NAFTA was signed in 1993, growing to $38.6 billion in 2015, and argued that the U.S. should be “prudent” in renegotiating the deal.
Top U.S. apple markets, 2017
|Mexico $274.8 million|
|Canada $174.3 million|
|India $97.4 million|
|Taiwan $73.6 million|
|Hong Kong $37.3 million|
|Indonesia $35.7 million|
|Vietnam $34.5 million|
|UAE $29.5 million|
|Dominican Republic $18.7 million|
|China $18.4 million|
President Trump’s protectionist moves could stop U.S. apple growers, especially those in Washington state, from further ramping up exports.
Top apple exporting states, 2017
|Washington $720.6 million|
|California $109.7 million|
|Arizona $71.8 million|
|New York $20.4 million|
|Florida $12.7 million|
The Food and Agriculture Organization estimates that global annul apple production is around 85 million tons, roughly half of which is grown in China. By comparison, the U.S. produces under five million tons a year. It exports a much higher percentage of its capacity than China, but, as in the steel industry, China has ramped up output, and now has the capacity to flood global markets.
In the last ten years, global apple trade has risen over 20% to around nine million tons a year. If U.S. growers are constricted by retaliation against the U.S. for its own import tariffs, that could prop up competitors in China and the European Union.
Top apple exporters, 2017
|China $1.5 billion|
|U.S. $975.2 million|
|Italy $964.2 million|
|Chile $599.9 million|
|France $589.2 million|
|New Zealand $488.3 million|
|South Africa $376.4 million|
|Poland $375.5 million|
|Netherlands $289.5 million|
|Iran $131.8 million|
The world’s top apple importers are in Europe, where the fruit has been part of people’s casual and formal diets for generations. Those markets are strong, but largely saturated and hard to find growth in.
World’s top apple importers, 2017
|Germany $662.3 million|
|UK $467.5 million|
|Russia $406.6 million|
|Netherlands $296.5 million|
|Taiwan $270.6 million|
|Belarus $267.5 million|
|Indonesia $263.5 million|
|U.S. $233.3 million|
|Canada $223 million|
|Egypt $209.4 million|
|Thailand $201.9 million|
The fastest-growing markets are developing economies in Asia, where rising incomes are allowing people to buy more fruit. Both Indonesia and Vietnam are on the U.S. and China’s top ten biggest buyers.
Top Chinese apple markets, 2017
|Thailand $157.9 million|
|Philippines $152.5 million|
|India $127.5 million|
|Vietnam $174.5 million|
|Bangladesh $109.4 million|
|Russia $104 million|
|Indonesia $134.3 million|
|Myanmar $94.6 million|
|North Korea $43.1 million|
|Hong Kong $40.8 million|
China exports under $10 million a year into the U.S., mostly Fuji apples into niche Asian markets in cities with Chinatowns like Los Angeles, San Francisco, Seattle, Chicago and New York.
If the two countries continue to escalate trade restrictions, they’re unlikely to gain more access.
After announcing its new duties on apples and other products, the Chinese finance ministry said that the U.S. duties on metals had “seriously damaged our interests.” It called its response “a proper measure adopted by our country using World Trade Organization rules to protect our interests.”
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The Trade Numerologist is IHS Markit’s unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit’s Global Trade Atlas database, the world’s most complete and accurate set of trade numbers.
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