University of California Economists say the trade war between the United States and China could result in trade losses of $1 billion annually for the state.

Researcher and Professor of Economics at the University of California, Colin A. Carter, spoke to FreshFruitPortal.com about the implications this will have on the state's agricultural industry if the United States doesn't reassess its trade relationship with China. 

The paper, "Revoking China's Preferred Trade Status Would be Costly for California Agriculture" opens by addressing conversations about revoking China's Permanent Normal Trade Relations (PNTR), a title that currently allows China to trade with the United States at most-favored-nation tariff rates. If done so, China would likely retaliate by raising agricultural import tariffs by 9.5%, resulting in a decrease "by one-third" in exports from California to China. 

Since China’s World Trade Organization accession, California's dependency on the country has quadrupled from 2.4% to 9.9%. About 8.4% of horticultural exports now go to China, a fivefold increase since 2002.

Carter says this is all due to growing protectionism growing from both sides of the aisle, "there's a significant number of congressmen who would like to play hardball with China when it comes to trade, if the PNTR status is revoked tariffs would increase, trade barriers would go up." 

Tree nut producers were especially impacted. The report cites previous studies that found that California almond exports losses in marketing years 2017/18 to 2021/22 have exceeded $755 million, leading to a considerable increase in U.S. almond inventories.

He explains that "China is the third largest market for almonds from California, and that's a high-value crop, and one that was hurt significantly by the previous trade war and it still hasn't recovered," he explains. "Agriculture is politically sensitive, so this trade war has morphed into a significant reduction in U.S. exports of agricultural products to China." 

The report shows that when the trade war broke out in 2018-19, the price of almonds plummeted to $1.40 per pound, or 40%. Walnut prices plunged 65%. 

China is also the second largest market for pistachios, worth $2.5 billion. 

He explains that the Trump administration did provide a large bailout to Midwestern farmers for losses caused by the trade war.

However, this was not extended to California farmers. "The trade war severely damaged the walnut industry particularly hard as well, because then China began producing their own walnuts," Carter said. "So, that market is not coming back." 

To hammer on how this has hurt the community, he cites specific companies like Andersen & Sons Shelling, a company that buys walnuts and exports them, located in California, that went bankrupt partly due to the change in trade relations with China. "A couple hundred farmers lost a significant amount of money when Shelling closed down." 

"Some walnut farmers have gone bankrupt, some are ripping up their trees and planting other crops," Carter adds. "But, you know, if things with China get worse, then other crops aren't necessarily going to be the best idea either."

He adds that the conversation about revoking China's PNTR status, and just the overall trade relationship between countries is on the back-burner until after the election. However, he says the tariffs and back-and-forth have already left a mark on U.S. agriculture, "these things tend to have side effects that are very costly to the domestic industry for years to come."