Mexico tariff pull back boosts Washington apple industry prospects

After a full year of uncertainty surrounding Washington’s signature crop, growers finally got a container ship of good news this week as Mexico officials announced they had eliminated the nation’s 20% tariff on imports of apples.

Mexico’s tariff drawback cannot be understated for its impact on Washington growers, trade analysts said. Washington apples represent up to 95 percent of all U.S. apple exports. Mexico imports 1 in 10 of all apples grown in Washington, or about 30 percent of the entire export market.

“It’s been a challenging year. We’ve had lots of obstacles for our growers and suppliers with these barriers to trade,” said Toni Lynn Adams, spokeswoman for the Washington Apple Commission. “It was really great to have some good news to share. It’s just good news to end our trade year on a positive note.”

The sea change began last Friday when United States trade officials announced they would be lifting tariffs on steel and aluminum from both Mexico and Canada as part of a verbal agreement to enter a new trade pact to replace the North American Free Trade Agreement.

Then on Monday, Mexico announced it had rolled back the 20% tariff on apples, which it put in place last June in retaliation for U.S. tariffs on aluminum and steel.

“Mexico has long been our top export market,” said Kate Tynan, senior vice president of the Northwest Horticultural Council. “It’s one of the few export markets that is strong year-round. The impact is going to be very immediate.”

Washington’s apple crop came in about 12% lower in 2018 than the previous year. During the same time frame, exports to Mexico were down 29.3%, Adams said.

“It’s kind of difficult, with a lower crop volume, to put a figure to the impact” the tariffs had on exports to Mexico, Adams said.

She explained that growers first fill the domestic demand for apples. So with fewer apples picked, industry analysts would have expected a decrease in exports anyway.

“So, we just couldn’t pinpoint how much of the reduction (in exports) was due to the volume and how much was due to the tariff,” she said.

Tynan, whose organization supports apple, pear and cherry growers and shippers in Washington, Oregon and Idaho, said that other countries had come forward to backfill the demand in Mexico for apples.

The European Union “was shipping quite a bit of fruit into Mexico,” she said. “It’s a highly competitive industry. There are plenty of players willing to step in and take that market share.”

Even with the tariffs, U.S. sends several container ships of apples, which remain fresh in storage for up to a year, to Mexico every day.

“I can tell you there is a lot of optimism between growers and shippers about the impact of the removal of this tariff will have,” Tynan said. “In the export arena, this is the best and biggest news we’ve had over the last year.”

The trade war had a lesser impact on apple shipments to Canada, which did not follow Mexico and place tariffs on imports of the fruit. Canada is the second-largest importer of Washington apples, with about 40% of exports going to those two countries, Adams said.

The new agreement between the countries states that future trade disagreements would be limited to steel and aluminum products and not include commodities such as apples, Adams said.

“This is hopefully leading to a trade agreement,” she said. “There is a possibility, without a new trade agreement, that we could digress into a pre-NAFTA situation that could lead Canada into instituting tariffs on apples.”

While Mexico gave a boost to the apple industry, cherry growers continue to face export challenges in the ongoing trade war with China.

After President Donald Trump threatened in 2018 to place tariffs on U.S. imports of steel and aluminum, China immediately targeted two things Americans export the most: agricultural commodities and airplanes.

The 10% tariff on Washington cherry imports went to 50 percent.

“That’s in place just like last year,” Tynan said. “China was not an emerging market. It was a strong market” for Washington cherries.

She did not have the corresponding numbers for cherry exports to China that she did for apples to Mexico.

“It’s too early to speculate on the impact the (China) tariffs will be in this upcoming season” for cherries, she said. “Our position has long been to encourage the U.S. government to pursue trade agreements as quickly as possible and come to a resolution that will allow for the removal of the retaliatory tariffs.”

But until those trade negotiations bear fruit, the analysts were happy to at least talk about normalizing relations with Mexico.

“For Washington growers, they are in close proximity, which cuts in transportation costs,” Adams said. “So, this is all-around welcome news to the Washington apple industry.”