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As President-elect Donald Trump vows to impose tariffs on imports from China, Mexico and Canada, economists say a retaliatory trade war could cause major financial damage to California’s agricultural industry. I’m warning you that there is.
In an analysis released before the presidential election, researchers looked at potential scenarios of tariffs and retaliation and found that California’s agricultural exports could fall by up to a quarter in the event of a major trade war. , estimated that it could cause the same amount of damage. $6 billion in annual losses.
Experts from the University of California, Davis and North Dakota State University said the most vulnerable products include pistachios, dairy products, wine and almonds, all of which are exported in large quantities to China.
“The worst-case scenario is pretty bleak,” said Sandro Steinbach, director of the Center for Agricultural Policy and Trade Research at North Dakota State University. “Fundamentally, tariffs are harmful to U.S. agriculture, especially California agriculture, because they invite tariff retaliation.”
The researchers analyzed three scenarios for potential U.S. tariffs, two of which are based on proposals put forward by Mr. Trump and his campaign. They say that if the Trump administration imposes huge tariffs under the most extreme scenario, other countries’ retaliation would affect everything from “large almond orchards in the Central Valley to small family-owned grape vines scattered throughout the winery region.” It will have a ripple effect across the state, all the way to the kindergarten.” country. “
Steinbach co-authored the study with Colin A. Carter, a professor emeritus at the University of California, Davis, and Yassin Yildirim, a postdoctoral fellow at North Dakota State.
They pointed out that California farmers experienced economic losses during the first Trump administration, when China imposed retaliatory tariffs on American agricultural products in response to the introduction of U.S. tariffs in 2018. The impact hurt California’s major agricultural exports, causing losses for growers of walnuts, almonds and other crops.
Researchers said that while farmers in the Midwest received large federal subsidies to cushion the blow in 2018 and 2019, California farmers received little in the way of government compensation.
“If a new wave of aggressive protectionist policies is enacted, California’s agricultural exports could face losses of up to $6 billion a year as a result, especially in key industries such as pistachios, dairy, and wine. “possibly,” the economists wrote.
“Rather than pursue policies that invite global retaliation, the United States should work toward more balanced trade agreements that protect domestic industries without triggering harmful trade wars.” “Every country involved in a trade war loses, and California agriculture cannot afford another trade war.”
The study was published by the University of California Giannini Foundation for Agricultural Economics.
The researchers studied one scenario in which the United States imposes a 10% import tariff on all goods from all countries. They also considered an extreme scenario in which the U.S. imposed a 60% tariff on Chinese goods and a 10% tariff on imports from all other countries.
Most recently, President Trump pledged to impose a 25% tariff on all products from Canada and Mexico, and an additional 10% tariff on imports from China.
“The scale of a potential trade war and subsequent retaliation is significantly greater than anything we have experienced to date,” Steinbach said.
Steinbach said the extent of the economic damage to California’s agricultural industry and producers of various crops will depend on the approach President Trump takes. For example, California’s processed tomato distributors rely on these countries for more than half of their exports, as the hefty tariffs imposed by the United States on products from Mexico and Canada trigger retaliatory measures by those countries. Therefore, it will be particularly hard hit.
Steinbach said that in addition to the immediate losses the industry faces from the trade war, foreign competitors will gain greater market share and uncertainty will cause investors to put less money into California agriculture. , said the costs of disruption will likely continue.
“We already have climate uncertainty. We already have uncertainty in water policy,” Steinbach said. “And if you add trade policy and tariff policy on top of that, why would I want to invest a lot of money into producing agricultural products?”
Researchers said agricultural areas in the Central Valley and Southern California were particularly vulnerable to economic damage. They predicted that five counties would likely bear the brunt of trade war losses: Fresno, Kern, Tulare, Merced, and Imperial, accounting for 53% of the total estimated losses.
A majority of voters in each of these five counties voted for Trump in the election.
In the case of pistachios, the crop is considered particularly vulnerable because China accounts for the majority of California’s exports. Growers have also planted vast new pistachio orchards over the past decade, dramatically expanding production in an effort to capitalize on the lucrative crop.
Researchers said that in a worst-case scenario, pistachio exports alone could cost up to $1 billion a year.
Other products expected to see significant declines in exports include hay, walnuts, rice, beef, grapes, oranges and cotton.
Much of the water diverted and pumped in California is used for agriculture. But Steinbach said the potential impacts on farm water use, both locally and statewide, are uncertain and depend on a complex combination of factors.
Governor Gavin Newsom strongly criticized President Trump’s plan to impose tariffs on Mexico and Canada. Visiting the U.S.-Mexico border in San Diego County on Thursday, Newsom described the planned tariffs as taxes that would raise food prices for Americans and fuel inflation.
“Don’t think for a second that this won’t affect you,” Newsom said.
The governor said California would be more severely affected than any other state, saying, “If these tariffs go into effect, farmers and ranchers will be disproportionately affected.” He said that’s before considering President Trump’s plan to mass deport undocumented immigrants, who make up the majority of California’s farm workers.
“I hope we can all agree on the impact on this region and that regardless of your politics, your pockets will be wide open,” Newsom said. “This is a betrayal, and it needs to be made clear to those who embraced and supported this agenda. That betrayal is happening in real time. You are being betrayed by these policies.”
In response, Trump’s transition team issued a written statement saying the president-elect’s policies will benefit all Americans.
“President Trump has committed to tariff policies that protect American manufacturers and working men and women from the unfair practices of foreign companies and foreign markets,” Caroline Leavitt, a spokeswoman for President Trump’s transition team, said in a statement.
California Farm Bureau President Shannon Douglas said in an email that the state’s agricultural operations “face significant challenges due to past trade disputes.”
“We advocate for fair trade practices and call on the federal government to prioritize policies that protect and enhance the viability and sustainability of our nation’s agricultural sector,” Douglas said.
The tariff plan creates further uncertainty for almond growers, already suffering from falling prices over the past decade. Some of these declines are due to the last round of retaliatory tariffs imposed by China in 2018.
This year, almond prices started to rise again.
“The market is recovering. It’s coming back. Producers are still hurting,” said Jake Wenger, general manager of the Salida Hull Association, which operates an almond hull factory in Modesto. “This year, people should at least be able to pay their bills, but producers who have had to sell some of their land just to pay their bills, to pay their debts, just to stay in business. I know.”
Wenger said his cooperative has about 110 producers, but he hasn’t heard anyone express concerns about the tariffs.
“I don’t think anyone is that worried,” he said. “Certainly, there will be some changes, but we’ll see what happens and what changes occur and we’ll roll with the punches, as farmers always do. I intend to.”
Keith Schneller, trade policy advisor for the California Almond Board, said the almond industry “continues to support reducing trade barriers.”
“We are closely monitoring these discussions, but until there is more clarity on the incoming administration’s agricultural and trade policy positions, it is difficult to know what impact they will have on California almonds.” said.
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