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Central Valley farmers brace for fallout from tariffs

Almond grower Don Davis doesn't mind getting caught in the middle of a trade war, as long as it's temporary and for a good cause.

The owner of 450 almond acres west of McFarland admits he hasn't paid much attention to President Donald Trump's decision to aggressively tax foreign imports — or China's retaliatory move to raise tariffs on California nuts and other U.S. products.

But Davis understands this much: It's going to hurt him financially for at least a year or two. His consolation is a belief Trump is doing the right thing.

"I think someone needed to stand up to ’em," he said of Trump taking on the Chinese. "But I just hope it's a process rather than an end result."

It's hard to say just how long the tariffs will remain in place, or how much they will lower prices paid to local farmers like Davis. But there's little doubt it's going to sting for a while.

Local almond and pistachio growers are bracing for an open-ended trade conflict economists say will hit the Central Valley hard, not only in the near term but potentially much longer because of their effect on hard-to-build relationships between buyers and sellers around the world.

"Those buyers will reluctantly move to somebody else, and once they've made the move it's hard to get them back," said Vernon Crowder, a retired banker focused on agriculture.

The Trump administration on Friday imposed a 25 percent tariff on $34 billion worth of Chinese imports, prompting China to fire back with duties totaling the same dollar value. Together with retaliatory tariffs by other countries, U.S. exports as a whole now face tariffs totaling some $75 billion.

China buys an estimated 6 percent of California ag exports. While no comparable figures are available for Kern, county officials note the local farming industry ships more frequently to China than to any other country. Last year, China imported locally grown almonds, carrots, cotton, grapes, oranges and pistachios.

Losing fewer than 10 percent of California's export customers would seem to pose only a small threat to the state's farmers. But economists say the problem multiplies because prices will fall across the board as that 6 percent looks for a home somewhere.

There is a bright side: Consumers can expect to pay somewhat lower prices for products like almonds, though the discount may trickle out gradually as excess almonds make their way into cereals and other products with nuts.

Farmers are expected to notice the change as soon as this fall, when sellers begin to get a sense of what almond prices will be for this year's harvest. What range prices will settle at is anyone's guess, but few expect Chinese consumers will happily pay for nuts after the price goes up 50 percent.

Outside California farming, the tariffs are expected to have a broad detrimental effect, raising costs for U.S. manufacturing and unsettling stock markets. The payoff, Trump and his advisers say, is China will eventually be forced to dial back its aggressive theft of U.S. intellectual property and other trade policies aimed at claiming the U.S.' global technological supremacy.

In the meantime, there is concern the Golden State's international farming competitors will ramp up production, replacing California products in China and other growing economies.

The executive director of the Kern County Farm Bureau, Beatris Espericueta Sanders, called it an "ugly situation" not likely to end any time soon. Worse, she noted, is that it comes as the industry faces other challenges, such as immigration, in which farmers must put their hope in legislators in Washington, D.C.

A solution some have proposed is simply to store excess nuts in warehouses. But Sanders said that's "not necessarily a great idea."

"We will have to store so much while we keep producing nuts," which she noted is a so-called permanent crop that can't easily be switched out to grow something else for a year or two. "It's really hard on the grower specifically."

Dan Sumner, an agricultural economist at UC Davis, sees trouble on many fronts. Whenever farmers install vineyard trellises or irrigation piping, he said, they're being hit by price increases resulting from new U.S. tariffs on imported steel.

On a bigger stage, the tariffs will lower U.S. incomes and increase unemployment, not to mention limiting the buying power of consumers in countries California growers hope to sell to, Sumner said. Plus, tariffs raise uncertainty, which he said deters business planning and investment.

Still, the situation should come as little surprise. Crowder pointed out how Trump pledged during his election campaign to crack down on immigration and confront China on its trading policies.

Given California farming's dependence on immigrant labor and fruit and nut exports, the rhetoric should have raised concern in the Central Valley. But judging by the pro-Trump signs he noticed driving through the area, he said, the threat seems to have been shrugged off.

"Now, the California ag industry ... is dealing with these realities," he said.

Sanders agreed with Crowder but added that the state's farmers have long voted Republican, prayed for good weather and hoped for the best.

"They have a faith in something bigger than politics, and this is what they've been taught generation after generation," she said. "It kind of seeps into their policy, their political choices."

Davis, the McFarland-area farmer, acknowledged he and other almonds growers face a painful adjustment, especially because of the hope many placed in China as a growing market for nuts. His biggest hope is that the tariffs end soon.

"If it's a permanent blockage between our nations," he said, "it's going to be terrible."

John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThird Graf.

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