Tariff terrorism

Even though we live in agriculturally focused counties, most of us are not aware of the basic economic and sometimes political details involved in the creation of our agricultural products. Many of us are starting to notice the removal of still viable walnut and almond orchards but don’t know why this is happening. The answer is both expected in a capitalistic system and potentially financially devastating for those involved in nut production in California.

To illustrate: For the past three years the return on a pound of in-shell walnuts has been close to or below the grower’s cost of producing that pound. It is estimated the cost of producing last year’s crop cost a grower between 60-80 cents per pound — the lower number if the grower had no land payments. The money earned on each pound for

2022 is expected to be 30-40 cents depending on the quality/color of the walnut meats. Sales of the 2022 crop may extend to August of this year or even later.

A grower in one of the walnut growing counties who has over 1000 acres of mature walnuts is an excellent example of what has happened to many walnut growers throughout the state — and there are 4,700 growers. This grower produced 5 million pounds of nuts in 2022. The cost of production, let’s say, was 70 cents or $3.5 million. Just hulling and drying for example would be about 7 cents a pound or $350,000! The return on the 5 million pounds at 45 cents would be $2.25 million: a loss of $1.25 million! And this is the grower’s third year of varying losses.

So, what’s a grower to do? Sustain the losses and pray 2023 will see a jump in prices? Play it safe and reduce irrigating, spraying, fertilizing, and skip harvesting? Sell off large blocks of his holdings? Renegotiate his mortgage at a lower rate, if that’s possible, but with many additional years? Or bulldoze out weaker blocks of trees and leave the land fallow until better times? Already growers have seen their personal and family wealth decline precipitously and can’t help but be fearful of what their financial status will be in the next few years after a lifetime of work and worries.

How could such a dismal series of events occur in one of the world’s most productive agricultural regions? In any capitalistic system the marketplace (the “invisible hands” of the buyers) determines supply and demand, prices, quality, the number of producers, the styles, profits and losses, the winners, the losers. So it is with both almond and walnut growers. Even weather, inflation and geopolitical events can have a bearing on costs and returns.

In 2019 almond production in California represented 82% of the world’s supply and was California’s leading agricultural export at $7.4 billion. About 1.6 million acres are presently in almonds (445,000 in walnut acreage) and produces about 3 billion pounds a year. Walnuts are the state’s fifth largest export.

One can argue that overplanting leading to over-production leading to a supply-demand price-per-pound problem should have been obvious and expected by all growers. But California ag growers fought through the 2008 financial crisis, the 2000 stock market crash, the 1970s runaway inflation problem, multiple years of below average rainfall, our recent COVID and shipping issues all of which hurt but were not calamitous as this crisis is becoming.

“What, then, is the chief cause this time? The triggering

factor of today’s economic problem is political/governmental malfeasance involving tariffs. The Constitution gives Congress the sole power “… to lay and collect taxes, duties and tariffs.” Presidents have been allowed by Congress to levy tariffs for a short time only if a “national emergency” existed. President Trump’s mantras of “Make America Great Again” and “America First” gave him the impetus to apply tariffs on countries that were causing America’s very large trade deficit: Trump’s concept of a “national emergency.” China and India became the first of several individual countries (Canada and Mexico soon to follow) and then the European Union. All of which were targeted by Trump via tariffs.

In March of 2018, a list of 1,300 Chinese imported products were hit with $50 billion in tariffs. When the Chinese retaliated with their own tariffs on American products, Trump responded with $200 billion and later with $300 billion in tariffs. China’s reaction to this was the halting of ALL American agricultural products such as almonds, walnuts, wine, soybeans, grapes, apples and more.

Later a 50% tariff replaced the full embargo. But a trade war was now in the making.

The next targets were tariffs on India’s steel and aluminum exports to America. Following China’s responses, India placed tariffs on numerous American imports. In 2019 India placed a 70% tariff on our almonds and apples and 120% on walnuts. As a result of Trump’s effort to mitigate this “national emergency,” the trade deficit, California nut growers lost their two largest buyers. India was the largest almond buyer in 2018-19 with $540 million representing about half of what India purchased in agricultural products. China’s purchase of California almonds fell by 33% in 2018-19.

Ironically, after five years, the Chinese exports to America have never been higher: $480 billion in 2018, $577 billion in 2021, and estimated to be about $612 billion in 2022 which would represent 18% of all American imports. America exported $151 billion products to China in 2021.

So, what’s the take-away here? Tariff terrorism was a colossal flop for Trump and caused a huge amount of collateral damage to the rest of us.

And who is to blame for this situation? We are! We are the ones who elect individuals to the presidency and to Congress and we are not spending the time to evaluate ALL of our candidates for any elective office to make sure they have all of our best interests in mind and not just political or self-interests. In the meantime … keep eating a lot more almonds and walnuts, every bite counts.

John Lewin is a Yuba City resident and former longtime history teacher at Marysville High School. Lewin taught at the school from 1964-2003 and was the school’s social science department chairman for 25 years. In 2016, Lewin was inducted into the school’s Hall of Fame with lifetime recognition award.