Why the Ongoing Trade Spat Is Making California's Almond Growers Nervous

There will be an abundance of almonds from California this year, and almond farmers are concerned there may not be a market for them. (Photo: AnnikonaAnn/Shutterstock)

The law of supply and demand says that when supply is abundant, prices will be lower. With the biggest ever California almond harvest expected this year, it's reasonable to expect that almond farmers would be prepared to hold steady or lower prices on the almonds they sell domestically and abroad.

What California almond farmers can't prepare for, though, is the ever-changing possibility of tariffs imposed by countries that import their almonds, tariffs that are part of an escalating trade war the United States is having with China, the EU, Turkey, Mexico, Canada and other countries.

About 80 percent of the world's almonds are grown in the U.S., and the majority of those are grown in California. They're important for California's agricultural economy, and the U.S. economy as a whole.

Tariff tit-for-tat

On Aug. 3, China announced tariffs of up to 25 percent on $60 billion of U.S. products. One of the products hit with a 25 percent tariff was almonds. The announcement wasn't a surprise. An escalating trade war began building last March when President Trump announced a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum from certain countries, including China. Since then the U.S. and China have been upping the anti regularly, adding more items to the list of tariffs each would impose.

But this isn't just a China thing. The EU has imposed a 25 percent tariff on U.S. almonds in retaliation for recently imposed U.S. tariffs. Spain and Germany, both members of the EU, are two of the top importers of U.S. almonds. India has imposed a 20 percent tariff on almonds. China, Spain, Germany and India are the four top U.S. almond importers, according to Modern Farmer.

For these buyers, the price to import almonds is now 20 to 25 percent higher. Understandably, these countries have stopped ordering as many almonds, and almond prices are dropping. 2018 almond prices have already fallen 14 percent, according to ozy.com.

Meanwhile, other countries are looking to purchase from other almond-growing regions such as Australia. Australian almond exports to China have already increased 17 percent from last year.

What happens when other countries have depleted the available almonds from other countries, considering that the U.S. produces 80 percent of the world's almonds? They may buy some U.S. almonds at a low price. Or, they may switch to other nuts that aren't grown predominantly in the U.S., which Richard Waycott, CEO of the Almond Board of California, told oxy.com is a real fear.

Fear often comes from uncertainty, and what the U.S. almond industry is facing at the moment is uncertainty. The trade wars are no where near settled yet. Not every country that's planning to impose tariffs has done so. Brussels may be next. It's putting together a list of tariffs on U.S. products as retaliation for import duties on cars from the EU.

What will all this do to the domestic price of almonds? With a large harvest and not as many outsiders purchasing almonds, the price on our grocery store shelves may fall. While that may be a short-term boon to the grocery budgets of U.S. shoppers, it will be an additional hit to the almond industry as a whole.