[Analytics] Storm in a teacup? Trump goes after all the tea from China with latest tariff push as trade war threatens to boil over

China was the largest exporter of tea – one of the latest products to face 25 per cent tariffs – to the US in 2018, according to trade data. ‘The tax and duty free import of tea was one of the founding tenets of the American Revolution,’ says president of the Tea Association of the USA. Chad Bray specially for the South China Morning Post.

Americans hoping to quench their thirst with a refreshing glass of iced tea may be in for a nasty surprise as temperatures rise this summer, according to US tea importers.

Tea, along with fireworks and footwear, is on the list of goods that will have import duties imposed on them as soon as July if the US carries out its threat of adding 25 per cent tariffs to thousands of products from China.

The proposed tariffs would increase prices for consumers and mark the latest escalation of a trade war between the world’s two biggest economies.

The US is heavily reliant on imports as it produces almost no tea of its own, according to the Tea Association of the USA. America is the world’s third largest importer after Russia and Pakistan, the trade group said.

In 2018, China was the largest exporter of tea to the United States, ahead of Argentina, Japan and India, according to data from the US International Trade Commission.

“Most Chinese tea stays in China,” said Jason Walker, the marketing director for Firsd Tea North America, the US subsidiary of China’s biggest tea exporter, Zhejiang Tea Group. “Growers [and] the manufacturers in China, they’re not going to feel it. They will either keep it in China or sell to some other market, like Europe.”

Last year, China accounted for US$90 million, or about 19 per cent, of the tea shipped to America, according to US customs data.

Firsd Tea acts as a bulk wholesaler of Chinese speciality tea that is used in some iced tea blends and other speciality tea blends, said Walker, one of several industry officials expected to testify on Friday at hearings in Washington.

More than 300 corporate executives and trade groups from dozens of industries are testifying in the hopes of convincing the US Trade Representative’s office to remove their products from the latest list of proposed tariffs on Chinese-made products.

US President Donald Trump wants to add duties on some US$300 billion of Chinese goods as he tries to reverse decades of trade, technology and industrial policy in China that he says unfairly targets American and other overseas businesses.

On a daily basis, more than half of Americans drink tea, 75 to 80 per cent of it iced, according to the Tea Association.

“Like wine, tea varies dramatically due to local terroir (geography, climate, and local manufacturing techniques),” Nick Salza, vice-president for leaf tea at Martin Bauer, the US subsidiary of German tea company Martin Bauer Group, wrote in a letter to the US Trade Representative’s office.

“China has many unique teas that are unavailable elsewhere, due to their unique cultivars (plant varieties), terroirs, and processing methods. In the area of speciality tea, many teas are unable to be sourced anywhere else in the world,” he said.

Martin Bauer Group, based in Vestenbergsgreuth, Germany, has been in the herbal and tea business since 1930.

Peter Goggi, the president of the Tea Association, said in a letter ahead of Friday’s hearing that the purpose of the tariffs is related to changing China’s practices regarding technology and innovation, which are not issues for the tea industry.

“There is virtually no commercial tea grown that needs to be protected by tariffs, nor are there any farm-based jobs that would be protected,” Goggi said.

He also said the proposed tariffs would have a “disproportionate economic impact” on US tea importers, who are mostly small and medium-sized businesses.

The American Revolution traces its roots back to opposition to British taxes on tea and other products.
The Boston Tea Party in 1773 was a pivotal event in the history of the formation of the American republic, in which colonists, including members of the Sons of Liberty, boarded a ship and threw its cargo of tea into the Boston Harbour in protest.

“The tax and duty free import of tea was one of the founding tenets of the American Revolution,” Goggi said. “The free and unencumbered import of pure tea from its origin is a centuries-old tradition.”

Firsd Tea, which imports the equivalent of 25 to 50 shipping containers of tea into the US every year, has accelerated shipments to its warehouses on the East and West coasts of the US in hopes of beating the tariffs, Walker said.

He said the company has five or six 40-foot containers in transit right now and should have enough supply in place to avoid raising prices for six months if the duties are enacted later this year.

“We’re doing everything we can to make sure we don’t have to pass [the] costs in the hopes that cooler heads will prevail and this will blow over soon enough,” Walker said. If the tariffs are put in place for a lengthy period, “we will have to make customers aware that we will have to pass on this cost.”