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Reaction to Chinese garlic tariff varies between domestic producer and importer

For domestic garlic producers, the 25 percent tariff that was recently added to the cost of all garlic from China is great news. It’s not as great for importers of Chinese garlic.

In May, Christopher Ranch Vice President Ken Christopher said that the company was “very excited about (the tariff) right now.”ILOVEPRODUCEFreshtography-20-1

He added that the increased duty on imported Chinese garlic was well overdue. The California garlic industry has long argued that Chinese garlic is being dumped in the U.S. market at below-cost prices. Christopher said the system in place to thwart that has long been ineffective. He said the new tariff would come closer to leveling the playing field.

Jim Provost, co-owner of Kelton, PA-based I Love Produce, concurred that the 25 percent garlic tariff is indeed big news, but as a major importer of Chinese garlic, he pointed out some potential downsides.

“The tariff applies to the cost of all garlic from China,” he said. “This includes fresh, peeled, jarred and dehydrated garlic. This tariff will have a big impact because China comprises about 70 percent of the world’s garlic supply, and it produces about 50 percent of the garlic consumed in the United States.”

Provost said that some products that retailers might not be aware of could be affected by the tariff.

“Some manufacturers of jarred garlic use Chinese dehydrated chopped garlic to manufacture their jarred garlic in the United States,” he said. “Although the label will carry a ‘Made in USA’ stamp on it, the main garlic ingredient will be from China. That ingredient will be subject to the 25 percent tariff, so it will have a huge impact on the cost, eventually extending to the retail level.”

He added that it will be interesting to see what the resulting impact will be when the industry, as well as consumers, see a 25 percent increase on garlic that carries a ‘Made in USA’ claim.

Christopher said that California garlic is typically sold at about $2 per pound, with a 30-pound carton of fresh garlic having an f.o.b. price of $60. Chinese garlic, he said, is often in the U.S. marketplace for $20 for a 30-pound carton. With a 25 percent tariff, that price will increase to about $25 per carton. He also believes the tariff will result in less Chinese garlic being shipped to the United States, resulting in a rising price and a tariff that is greater in terms of dollars.

If the market rises to $25 for a 30-pound carton of Chinese garlic, the 25 percent tariff would net $6.25, bringing the total price to $31.25, bringing it even closer to what he believes is superior U.S. garlic.

Both Christopher Ranch and I Love Produce import garlic from places other than China to fill their needs.

“With regard to country of origin, we have basically two sets of customers,” said Provost. “One is price driven, where Chinese garlic makes the most sense due to its favorable cost. Customers that want non-Chinese garlic tend to prefer that of Spain and California because they have the perception that garlic from these sources have a better flavor profile and quality over Chinese product.”

He added that consumers are a diverse group with different needs and tastes, so just as both craft beers and light beers are popular, I Love Produce offers both Chinese and non-Chinese garlic to its customers to maximize the sales and profitability of the category.

Christopher said that over the years, Chinese garlic has not fared as well at retail, but the U.S. market struggles to capture foodservice business because of the low-cost Chinese alternative. He does not believe the tariff will result in a corresponding increase in the price of California garlic, noting that Christopher Ranch works with its customers on a year-round program with year-round pricing.

He also said that the company is not anti-imports and has no problem competing against garlic grown in Spain, Argentina and Mexico. In fact, Christopher Ranch sources product from these countries and sells it to its customers, though it is not packaged under the Christopher label. Christopher believes suppliers from those countries base their price on the market and their costs and are not “non-market actors.”