Gro­cery prices could spike over trade wars

Many sup­pli­ers in limbo await­ing Trump talks

USA TODAY US Edition - - MONEY - USA TODAY NETWORK Alexan­der Coolidge Cincin­nati En­quirer

Pres­i­dent Don­ald Trump is bet­ting that his trade wars won’t af­fect U.S. shop­pers as he seeks to re­write – or end – in­ter­na­tional trade deals.

While U.S. ex­porters – farm­ers and man­u­fac­tur­ers – are anx­iously look­ing on as the Trump ad­min­is­tra­tion de­mands terms to bring jobs back to Amer­ica, the av­er­age con­sumer isn’t see­ing any fall­out. Yet.

Nowhere is that dis­con­nect more ev­i­dent than at the Amer­i­can su­per­mar­ket, where only mild in­fla­tion is un­der­way.

But that could change as Trump plays hard­ball with Canada – a crit­i­cal source of beef, seafood and pro­cessed goods from choco­late and cook­ies, to bread and cake mix. Trade ten­sions are also mount­ing with China.

The rea­son is that Amer­ica’s de­pen­dence on im­ported foods has soared to all-time highs as shop­pers snapped up more than $137 bil­lion in 2017.

Im­ports now ac­count for 20 to 25 per- cent of to­tal U.S. su­per­mar­ket sales. Those sales are more than triple what they were at the start of the mil­len­nium.

More than one-third of fruits and veg­eta­bles pur­chased by Amer­i­can shop­pers are im­ported. Ditto for cook­ies and choco­lates. And nearly one-fifth of meat con­sumed by Amer­i­cans comes from abroad.

Trump hasn’t slapped tar­iffs on food im­ports yet, but he has threat­ened to scrap the rest of the North Amer­i­can Free Trade Agree­ment with Canada. Talks with that na­tion are ap­proach­ing a crit­i­cal Oct. 1 dead­line.

Trade ex­perts warn trash­ing NAFTA is an ex­treme step that could dis­rupt the long-es­tab­lished flow of goods be­tween trad­ing part­ners – in­clud­ing nearly $24 bil­lion worth of food im­ported from Canada an­nu­ally.

While Ohio trade at­tor­ney Dan Ujczo

be­lieves Trump is an­gling to win the best terms and ex­pects that Canada and the U.S. ul­ti­mately will cut a deal, he con­cedes there are real dan­gers.

If NAFTA was killed with­out a re­place­ment pact, Canada’s trade sta­tus would re­vert to “Most Fa­vored Na­tion” – and a raft of older, higher taxes would be levied on all im­ports.

A wave of in­fla­tion would likely hit food next year on both im­ported and then do­mes­tic goods.

For ex­am­ple, Canadian cu­cum­bers – which the U.S. im­ported more than $203 mil­lion worth of in 2017 – would go from be­ing duty-free to sub­ject to a 9.6 per­cent tar­iff (tax).

“If it gets to that, there’s a whole host of hor­ri­bles,” said Ujczo, at Colum­bus, Ohio-firm Dick­in­son Wright. He noted that U.S. steel pro­duc­ers upped their prices af­ter tar­iffs made for­eign steel more ex­pen­sive. “You’ll see in­fla­tion­ary pres­sures.”

❚ Sooth­ing el­e­va­tor mu­sic in aisles, for now: Right now, at the su­per­mar­ket, there’s no sign of pos­si­ble trou­ble. At Kroger Mar­ket­place in the Oak­ley neigh­bor­hood of Cincin­nati, one shop­per takes small price changes in stride.

“I try not to sac­ri­fice what I eat. If prices go up, I get fewer ex­tras, like sweets,” said Diana Vera, a 36-year-old high school teacher who lives in Fairfax, Ohio. She watches pro­duce prices, notic­ing that toma­toes and avo­ca­dos have edged up but bananas have ebbed.

Dur­ing the first 18 months of the Trump ad­min­is­tra­tion, in­fla­tion on food pur­chased for con­sump­tion at home has climbed 1.2 per­cent ver­sus an over­all in­fla­tion rate of 2.8 per­cent.

An­nemarie Kuhns, an econ­o­mist with the U.S. Depart­ment of Agri­cul­ture, said in­ter­na­tional trade has con­trib­uted to the slow growth in prices.

Bumper crops and few ma­jor dis­rup­tions have made that trend pos­si­ble. A strong U.S. dol­lar also helped flood Amer­ica with cheaper food in two ways:

“Im­ports were cheap and more plen­ti­ful, and ex­ports slowed and the food stayed here,” Kuhns said.

To­tal sales of im­ported food last year were nearly dou­ble what they were a decade ago. If all im­ported food were it­self a su­per­mar­ket chain, it would be larger than Kroger and ev­ery other U.S. gro­cer be­sides Wal­mart.

Amer­ica’s big­gest food trad­ing part­ners are the same ones Trump is fight­ing with: the Euro­pean Union, which sold $27 bil­lion of goods; Mex­ico, which ex­ported $26 bil­lion to the U.S.; Canada, nearly $24 bil­lion; and China, which sold $6.2 bil­lion.

❚ Crazy or crazy like a fox? No one watch­ing Trump’s NAFTA gambit be­lieves the U.S. will scrap the agree­ment. Canada and Mex­ico are too im­por­tant.

In late Au­gust, Trump an­nounced a re­vised NAFTA deal pro­posal with Mex­ico (that the next Congress must ap­prove in 2019). Ne­go­tia­tors have un­til Oct. 1 to ham­mer out a pact to in­clude Canada in the NAFTA over­haul.

Trump’s rep­u­ta­tion for er­ratic be­hav­ior and rash de­ci­sion-mak­ing has strength­ened his bar­gain­ing po­si­tion – for now. The prospect of the U.S. cut­ting a deal with Mex­ico alone has scared Canadian ne­go­tia­tors back to the ta­ble.

If Trump pulled out of NAFTA, the con­se­quences would be se­vere and swift. The po­lit­i­cal fall­out could be dire.

If Canada is treated like a “Most Fa­vored Na­tion,” thou­sands of food sta­ples would switch from duty-free to sub­ject to tar­iffs (taxes) – and a wave of food in­fla­tion would likely hit U.S. con­sumers. Im­ported beef would get a 4 per­cent tax; ketchup, 6 per­cent; ce­re­als such as corn flakes would get a 1 per­cent tax; toma­toes, 12.5 per­cent; onions, 3.6 per­cent; and pota­toes, 6.4 per­cent.

“The av­er­age per­son wants to know if this is go­ing to make my bread or my cars cost more,” said Gene Beaupre, a re­tired po­lit­i­cal sci­ence teacher at Xavier Univer­sity in Cincin­nati. “Right now, trade is just a head­line – peo­ple don’t feel like it’s go­ing to turn around and hurt them.”

USA TODAY NETWORK

More than a third of veg­eta­bles and fruits pur­chased by U.S shop­pers are im­ported.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.