Tariffs likely targeted to inflict pain on the Mid-Columbia

Here is how Washington’s apples may be affected by tariffs

Washington agricultural products are at risk due to retaliatory tariffs by China and Mexico.
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Washington agricultural products are at risk due to retaliatory tariffs by China and Mexico.

Tidy rows of apple trees climb the hills above Broetje Orchards’ packing houses in Prescott, east of the Tri-Cities.

They extend to the Snake River and fan out along both sides. Broetje grows 500 million apples on more than 6,000 acres in Eastern Washington — 4,300 of them in western Walla Walla County.

At mid-summer, the trees are laden with Red Delicious, Fuji, Opal and now Cosmic Crisp, the up-and-comer of Washington’s apple industry.

Workers pack Red Delicious apples harvested last fall for export. A conveyor brings the apples from cold storage. An overhead conveyor system delivers fresh boxes to the workers’ packing stations.

Many of those apples will go to Mexico, a key market for Washington-grown Red Delicious apples — for now.

In retaliation for U.S. tariffs on steel, aluminum and intellectual property, countries like India, China and Mexico have added tariffs that touch Washington-grown products, pushing their costs up 50 percent or more.

0922 ugly apples
Washington is the nation’s leading producer of fresh apples and Broetje Orchards is one of its biggest growers. File Tri-City Herald

The Washington Department of Agriculture calculates $650 million in agricultural exports is at risk — $480 million to China and $166 million to Mexico.

The Mid-Columbia is caught in the middle.

No accident

Locally grown and processed crops top the tariff hit list — hay, cherries, wheat, applies and frozen potato products, among others.

It’s probably no accident Washington is in the crosshairs, said Prof. Debra Glassman, who teaches about trade at the University of Washington’s Foster School of Business.

Trade partners target products to maximize financial and political harm.

Earlier this year, the European Union responded to the U.S. tariffs by targeting House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell.

The E.U. lumped tariffs on Harley-Davidson motorcycles in Ryan’s congressional district, and on Kentucky bourbon in McConnell’s.

But agriculture is a big, obvious target. It’s critical to the U.S. economy, and many of its products — like apples and cherries — are recognizably American.

Dan Newhouse
Dan Newhouse

Glassman believes the rising prominence of U.S. Rep. Cathy McMorris Rodgers, R-Spokane, helped put Washington in play.

“The trade partners choose pain points,” she said.

For her part, McMorris Rodgers has encouraged the Trump administration to “walk back” tariffs and negotiate trade deals.

When the U.S. Department of Agriculture announced a $12 billion package to aid farmers impacted by tariffs this week, she issued a statement saying, “Farmers want trade, not aid.”

U.S. Rep. Dan Newhouse, R-Sunnyside, is waiting for details about how the aid money will be doled out.

In a statement, he pointed out that Washington alone exports $15 billion in agricultural and related products.

He also told farmers to keep the long-term vision of better trade deals in mind.

“President Trump’s goal is to strengthen America’s hand on trade to make it free and fair in order to increase exports,” he said.

Spreading pain

“Trade not aid” has become the rallying cry for Washington farmers.

Cass Gebbers, an Okanogan apple grower and member of the Washington Apple Commission, took the message to Congress earlier this month.

He testified before a House Ways and Means subcommittee about tariffs’ effect on Washington’s fruit industry and how it will ripple through the local economy.

“The effects of these retaliatory trade tariffs are directly hitting the growers who produce fruit,” Gebbers said.

He predicted the pain will spread as growers cut employees, put off big projects and equipment purchases, and delay planting new orchards.

Locally grown and processed crops top the tariff hit list — hay, cherries, wheat, applies and frozen potato products, among others. These red delicious apples are being processed at Broetje Orchards this week. Noelle Haro-Gomez Tri-City Herald

At Broetje, the 2018 apple season is proceeding as usual.

Jim Hazen, Broetje’s business manager, pushed tariff-related questions from the Herald to the Northwest Horticultural Council, an industry advocate.

But he confirmed that vital exports are to Broetje’s bottom line.

Washington is the nation’s leading producer of fresh apples and Broetje is one of its biggest growers. The U.S. domestic market can’t absorb Washington’s apple crop, much less the apples grown in 31 other states.

To pick or not to pick

Mark Powers, president of the horticultural council, said he’s trying to be optimistic.

But it’s not easy.

“We really need to return to a normal trade environment,” he said.

The aid package won’t cover many of Washington’s crops, and he doubts it will fully mitigate the losses of those it does cover.

There’s still time for the Trump administration to resolve the stand-off before the fall apple harvest, Powers said.

A troubling scenario looms if it doesn’t.

“What do you pick and what do you not pick?” he said.

Sean Gilbert, center, checks the size of cherries at his family’s orchard, while workers join in the harvest of the high-value, fragile crop. Gilbert Orchards has long recruited most of its workers from Central Washington. Hal Bernton TNS

Powers also said this year should have been a terrific one for Washington cherry growers.

An excellent growing season here and a weak one in California meant Washington had the market mostly to itself.

Instead, the short, fast cherry season opened with a 15 percent tariff from China, which was retaliating against steel and aluminum tariffs. That grew another 25 percent when China shot back against tariffs on intellectual properties.

Powers said it’s too soon to calculate the damage to the market, but the market is essentially closed even as the harvest wraps up in Northern Washington.

“We’re done. Everyone is really hoping that we’re not going to be in the same position next year,” he said.

China was the top market for Northwest cherries in 2017 with exports of about $130 million or 3 million boxes.

‘We haven’t sold anything this year’

This year also should have been a celebratory one for Washington wheat growers.

Scott Yates, spokesman for the Washington Grain Commission, explains that China only recently began importing U.S. wheat.

Around this time last year, the Northwest had exported 270,000 metric tons worth $51 million to China.

Then the trade war began.

“We haven’t sold anything this year,” Yates said. “It’s a weird situation. We’ve never faced anything like this.”

Wheat growers have the option of storing the harvest if there’s no one to buy it.

But, “I don’t want that to be our reality,” Yates said. “I don’t want to see ground piles of wheat.”

Wheat farmers already are feeling pain in 2018. Tri-City Herald

Eagle, Idaho-based Lamb Weston is exposed too, which means so is the Mid-Columbia.

The french fry giant is one of the region’s largest private employers, with 4,500 workers in its production facilities, warehouses, research and development, and a corporate office in Kennewick.

Washington exported almost $40 million of frozen potato products — namely french fries — to Mexico last year.

Tom Werner, president and CEO, touched on the subject Tuesday during an earnings call with analysts, saying trade disputes disrupt partnerships.

“Tariffs raise costs and open doors to competition,” Werner said. “At the very least, the threat may encourage customers to seek alternative suppliers.”

In a follow-up message, a Lamb Weston spokeswoman called Mexico an important, but small, market.

Earlier this year, Lamb Weston announced a $250 million expansion of its french fry processing capacity in Hermiston. File Idaho Statesman

With its global network of processing plants, the company has been able to supply customers with minimal disruption, she said.

Matt Harris, assistant director and director of government affairs for the Washington Potato Commission, said growers are wary.

“Any type of trade imbalance or action against trade, like a port slowdown, it’s something that we have to monitor,” he said.

Washington growers plant about 165,000 acres of potatoes.

The harvest is just getting started.

Wendy Culverwell: 509-582-1514