A 15% tariff to punish Chinese trade practices is now impacting tea.
The Tea Association of the USA points out that U.S. consumers will paythe price for the unprecedented tariffs on Chinese tea effective this week.“It’s the consumers that get hurt,” says association president Peter Goggi.
Industry leaders say the tax will be disruptive, not debilitating, but asBigelow Tea CEO Cindi Bigelow explained to the Hartford Currant, “It’s probably a$2 million impact on our company — right out of our bottom line.”
Goggisays tariffs have a “disproportionate economic impact” on small andmedium-sized businesses responsible for paying the tariff.
“Weare already paying 25% on packaging items from China,” said Mike Harney, vicepresident at Harney & Sons Fine Tea.
Bigelowsaid last year’s tariff on aluminum forced the company to raise prices.
“Chinais one of the few countries that you can get the thinnest-gauge aluminumavailable. Nothing is made like that in the United States. Nothing. When thealuminum impacted us, it was devastating. We had to increase the price, and thecustomer saw that,” she said, adding that the oils in tea have to be protectedfor tea to retain its flavor, “and the only thing to protect them is aluminumpouches.”
Inanticipation of the tariff Harney and others stocked up, “We have brought inextra tea already. However, over time our costs will go up,” he explained. “Teais a competitive market, so our ability to pass on costs are limited.”
Whynot switch origins?
“The only place for us to get the smooth-tasting,quality green tea is from China,” Bigelow told the newspaper. “You can’t justgo to another country.”
“Chinais our largest supplier. India had a bad year; Sri Lanka teas have beensliding. So, China is our most important source and not replaceable,” saidHarney.
ThomasShu and his partner Josephine Pan have owned ABC Teas since 1978. They import arange of teas for their JT & Tea wholesale operation in California. Shu,who is designated Taiwan’s Tea Ambassador, said that while Taiwan cannotapproach the volume of China’s annual production of 5 billion kilograms, teafrom Taiwan meets or exceeds standards of quality for flavor as well as USDAand EU and Japanese rules for organic production. Goggi said that the US TradeRepresentative (USTR) does not classify tea from Taiwan as Chinese origin.
Indonesia produces 50 varieties of tea, mainlygreen, but the focusis on bulk production of CTC (cut, tear, curl) tea. It is the world’s seventhlargest producer at 140,000 metrictons in 2018, the highest production in the last four years. But specialty teasmake up only about 10% of the total.
Japanis also a major green tea producer but the Japanese drink virtually all theirtop-quality tea (matcha is the exception).
Thetrade war continues to escalate
InAugust the Trump Administration announced a 10% tariff on tea that was laterbumped to 15% and could go as high as 30%. The new rule covers all Chinese teaincluding green and black tea packaged in bulk (shipped in packages greaterthan 3 kilograms).
Accordingto the latest press release USTR willbegin the process of increasing the tariff rates on products List4B to 30% on October1 following a notice and comment period.
Hereis a link to products onList4A (effective Sept. 1) and to List4B products (tariffseffective Oct. 1 with some delayed until Dec. 15).
InJuly, Goggi noted that President Donald Trump cancelled the proposed tariffwhen the Chinese agreed to return to the negotiating table. While negotiationscontinue, a timely resolution seems unlikely.
The latest clash has rewritten the rules of trade “in ways that have no recent historic precedent” and are driving the world’s two largest economies further apart, Ana Swanson of the NYT writes.
OnSept. 3 the New York Times reported theaverage tariff on Chinese goods is now more than 21%. Tariffs will costAmerican households and average $460 by year end. Beijing responded withtariffs of its own on American goods and filed a formal complaint with theWorld Trade Organization.
InAugust the Trump Administration, expressing concern for retail sales during theholidays, delayed until Dec. 15 tariffs on several categories of goodsincluding laptops, cell phones, toys and other products “based on health,safety, national security, and other factors.” No tea products appear on List4B.
Chinaretaliated Aug. 23 by increasing tariffs to 10% and 15% on $75 billion ofAmerican goods effective Sept. 1. Hours later and just prior to the G7conference in France, Trump added 5% to the 10% proposed for $550 billion inChinese goods, including tea, and threatened 30% tariffs on a long list ofconsumer goods late in the year. He then expressed regret that he had notraised tariffs even higher.
“Asyou know, I testified before the Section 301 Committee on June 21,” said Goggi.The Section 301 Committee received a total of 2,932 comments on all goodsproposed as well as testimony from more than 300 witnesses. The tax applies toall products that are entered for consumption or withdrawn from warehouse forconsumption on or after Sept. 1 (List4A) and Dec. 15 (List4B).
“Nothingcan be done because the current administration is using tariffs as a weapon,and we’re in the pathway of this,” observes Bigelow. “We can only hope thatWashington, D.C., will wake up and see what they are doing to companies aroundthe United States of America. That’s all we can hope for. I can’t speak forTrump, but anyone who is in that position should know the impacts on companies,”said Bigelow.
Sources: Channel News, Hartford Courant, New York Times