WENATCHEE, Wash. — Apples, walnuts and almonds are the three U.S. agricultural commodities that will apparently be hit hardest by new Indian tariffs.
On March 4, President Donald Trump announced his decision to remove India from the U.S. Generalized System of Preferences, which had allowed it to export more than 3,000 items to the U.S. duty-free. The administration cited India’s new trade barriers such as tariff increases.
That action was delayed while negotiations took place.
In early June, Trump announced India would lose its GSP status. India retaliated June 15 by increasing its tariffs on 28 U.S. products.
Walnuts could be completely shut out of the India market as result of the higher tariffs, and the hikes on almonds and apples could drastically reduce shipments to that nation.
“All countries sending apples into India were at 50% tariff and now we will be higher than anyone else at 70% which puts us at a competitive disadvantage,” said Todd Fryhover, president of the Washington Apple Commission in Wenatchee.
“It will have a dramatic impact for the balance of this season but the big question will be the situation for this fall’s crop,” he said.
Even with a 50% tariff on U.S. apples, India for years has been a top market for Washington apples, averaging about 5 million, 40-pound boxes annually worth roughly $100 million. India bought $156 million worth of U.S. apples in 2018, according to USDA. They were likely all from Washington.
India has been threatening a 25% tariff increase since last August that has hampered shipments this season, Fryhover said.
“Indecision is a killer to uniform business. You sell at today’s price but can have a duty hit you while your product is 40 days on the water getting there,” he said.
As of June 15, Washington had shipped 2.6 million boxes of apples to India this season — down 66.8% from the 7.8 million shipped by the same point a year ago, said Toni Lynn Adams, apple commission spokeswoman.
But the 8 million total for the 2017-18 season was exceptionally high, driven by closure of Chinese apple shipments into India and a lot of Washington apples being bought last summer in anticipation of the tariff increase that didn’t happen until now, Adams said.
“Over six weeks, it was 2.2 million boxes, which kind of overwhelmed the market and there was a huge drop in October,” she said.
Even with the decrease in shipments since then, India remains Washington’s No. 3 apple export market behind Mexico and Canada.
Washington expects a larger apple crop this fall, making every export market more critical.
Whether Indian consumers are willing to pay 20% more tariff for Washington apples versus apples from Europe depends on many things, including the size of the European crop and whether China regains access, Fryhover said.
“Europe backfilled a lot on us this season (in India), which hurt our brand,” he said.
Mark Powers, president of the Northwest Horticultural Council in Yakima, said European and Southern Hemisphere apple producers will gain a competitive advantage against Washington state. He said he’s not optimistic for a quick resolution because India needs to address its steel and aluminum issues and meet the requirements of the U.S. Generalized System of Preferences program.
“India has to be able to engage U.S. government negotiations,” he said.
More than 6,000 growers and processors in California produce about 80% of the global almond supply. India is California’s No. 1 almond market. Almonds are the top U.S. agricultural export to India with a value of $657 million in 2017.
Between Aug. 1 and May 31, California has shipped 201.8 million pounds of almonds to India, up 12% from a year ago, according to the Almond Board of California.
The increase is due to India becoming an alternative market to China, where a new 50% tariff has reduced imports of California almonds by 30%, said Julie Adams, Almond Board vice president in Modesto.
“Increasing tariffs in India disrupts our market options,” Adams said. “You can’t look at one country in isolation. What happens in one market has broader impacts throughout the global trading environment.”
Australia is the alternative supplier and has been replacing California almonds in China, she said.
Adams said walnuts and apples stand to encounter even bigger potential impacts than almonds because their tariff increases are greater.
California mostly exports in-shell almonds to India, and the tariff went from 23 to 27 cents per pound, Adams said. That’s an increase of about 17%. The tariff on kernels increased from 65 to 78 cents per pound, or 20%, she said.
“Our tariff is a specific duty, not a percent of value on import,” she said.
With a record 2.5 billion-pound almond crop on the way this year, California growers don’t want trade disruptions, and “India continues to be a key market for us,” Adams said.
Michelle Connelly, executive director of the California Walnut Board in Folsom, said a 20% tariff increase effectively closes the India market to California walnut producers.
The tariff on in-shell nuts was 100% and is now 120%. The tariff on shelled nuts has increased from 30.9% to 50.9%, she said.
“India has been one of our most promising markets for growth until the base rate change on in-shell last year from 30.9% to 100%,” she said. “The additional 20% tariff puts California at a disadvantage to other producers entering the market. We are extremely disappointed we could not reach resolution on the ongoing tariff issues.”
Before the tariff increases, California shipped 15,857 tons of walnuts valued at $43.4 million to India during the 2016-17 season.
After the increases, California shipped 11,539 tons valued at $39.2 million during the 2017-18 season.
So far for 2018-19, shipments have dropped to 7,199 tons of walnuts valued at $15.3 million, said Dana Hull, Connelly’s assistant.
Chickpeas, lentils and brine shrimp are also reportedly impacted.