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Here’s how the trade war with China is affecting the outlook for Alaska’s seafood industry


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https://www.adn.com/business-economy/2018/07/16/heres-how-the-trade-war-with-china-is-affecting-the-outlook-for-alaskas-seafood-industry/

 

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China is Alaska's biggest seafood buyer, purchasing 54 percent of Alaska seafood exports last year valued at $1.3 billion. On July 6, a 25 percent tariff went into effect on U.S. imports to China, including all Alaska salmon, pollock, cod, herring, flatfish, dungeness crab, sablefish, geoduck clams and more.

 

Then on July 11 Trump added a 10 percent tariff on all seafood sent from China to the U.S.

 

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It will hit 70 percent of imports of frozen cod fillets. Likewise, 23 percent of all frozen salmon fillets come into the U.S. from China, including pink salmon that is reprocessed into salmon burgers and fillets.

 

Trade data show that China represents 47 percent of U.S. breaded shrimp imports and 37 percent of frozen squid imports. China also supplies 20 percent of the U.S. frozen scallop market.

 

Sackton said the economic hit will go far beyond the $275 million.

 

"As sellers are forced to raise prices, competitive products from other countries will follow suit, resulting in across the board seafood price increases. That will discourage seafood buying so sellers will lose business as customers back away," he added.

 

Quote

In recent years, Alaska seafood sales to China have increased by millions of dollars through eCommerce activity, said Hannah Lindoff, international program director for the Alaska Seafood Marketing Institute.

 

Lindhoff said ASMI will try to expand sales to other markets, such as Brazil, Spain and Ukraine. But, as Sackton points out, it is more expensive to mount campaigns in multiple countries than in a single large market like China.

 

ASMI operates on a shoestring international budget of less than $7 million a year, mostly from grants and federal dollars. Its overall budget is about $22 million, nearly all from processor taxes.

 

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5 minutes ago, PaladinSolo said:

Supply and demand, supply goes down, prices go up.

 

The reason that doesn't seem to push through under the context described is because they're saying that the price raises will ultimately hurt businesses because it will drive too many customers away (I perhaps should have quoted the rest to make this more clear).

 

If a raised price is simply bad for the business, but is only required of the US, the competitors would be wise to keep their prices relatively stable, and enjoy an increased market share, rather than similarly rise and drive everyone away, no?

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3 hours ago, PaladinSolo said:

Impact of a global market thats about to see more of a cheaper Chinese product making the US product even less enticing?  

 

I was asking why it wouldn't be the case that other sellers would keep prices low to take the market. I think I may be confused about which actors are being referenced in that quote. They raise a few: "American sellers, American buyers, Chinese sellers, Chinese buyers, and finally other countries selling.

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35 minutes ago, legend said:

I was asking why it wouldn't be the case that other sellers would keep prices low to take the market. I think I may be confused about which actors are being referenced in that quote. They raise a few: "American sellers, American buyers, Chinese sellers, Chinese buyers, and finally other countries selling.

I agree it's a bit confusing. I think the situation is this:

-US to China seafood is now subject to a 25% tariff

-China to US seafood is now subject to a 10% fariff. This includes products caught in the US but processed in China (e.g. salmon turned into burgers).

 

So US sellers that process their product in China pretty much have to raise prices, unless they're going to find a way to process it here.

 

US sellers that sell to China also have to raise prices, or they can sell elsewhere, but selling elsewhere means dealing with many disparate markets (Brazil, Spain and Ukraine), rather than the single large market of China.

 

4 hours ago, legend said:

 Really? Wouldn't they keep their prices the same to steal the market?

I kinda agree. If (as a hypothetical example) Canadian seafood isn't subject to these tariffs, and their competitors in the US now have to raise prices, it seems like they could try and leverage that price advantage to steal more of the market.

 

They don't get into it in the article, but my first thoughts are that the Canadians might also raise their prices, but just raise them slightly less. A 5% price increase would still give them a 5% advantage, if all else is equal. Otherwise the issue could just be supply. The price hike will happen more quickly than you can increase the supply of fish, either from farming or fishing, so you can either sellout your product at the same price, or take advantage of increased prices across the board and take the extra money. Given the nature of these tariffs and the President, I'd be very hesitant to go out and acquire the infrastructure necessary to dramatically increase supply just in case this all goes away suddenly.

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1 hour ago, legend said:

 

I was asking why it wouldn't be the case that other sellers would keep prices low to take the market. I think I may be confused about which actors are being referenced in that quote. They raise a few: "American sellers, American buyers, Chinese sellers, Chinese buyers, and finally other countries selling.

 

They don't raise the prices to match the tariff priced goods but they do raise them. Lets say 100lbs of tariffed fish costs $150 from the US, country B was selling at $130 now they can raise their price to $145 and make more money while still undercut the tariffed goods. 

 

Tariffs are often a huge win for countries not directly involved with them

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15 minutes ago, elbobo said:

 

They don't raise the prices to match the tariff priced goods but they do raise them. Lets say 100lbs of tariffed fish costs $150 from the US, country B was selling at $130 now they can raise their price to $145 and make more money while still undercut the tariffed goods. 

  

Tariffs are often a huge win for countries not directly involved with them

 

That could indeed make sense to me, but then the way the article was phrased seemed like they were saying that whatever raise in price it will be from competitors, it will cause the market to shrink in a counterproductive way in which no one wins. But then why would competitors raise the price that much? They should only raise it to the extent that they're still getting a win, because they're not under any external pressure to raise at all, just the US.

 

But I may have just badly misread what the article was trying to say.

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3 hours ago, elbobo said:

 

They don't raise the prices to match the tariff priced goods but they do raise them. Lets say 100lbs of tariffed fish costs $150 from the US, country B was selling at $130 now they can raise their price to $145 and make more money while still undercut the tariffed goods. 

 

Tariffs are often a huge win for countries not directly involved with them

 

Good explanation, mate.

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