Tariffs and Tomatoes

If you’re paying attention to trade policy at all, you’ve probably heard that the Trump Administration is threatening to raise tariffs on Friday on a large part of the exports that China sends us, again. This news caused the stock market to fall, and it also likely caused the hopes of soybean and corn farmers throughout the country to fall as well. They have taken the brunt of China’s retaliatory tariffs against the crops they grow.
But you may not have heard about a much smaller and more focused tariff that goes into place today: a tax on fresh tomatoes imported from Mexico. It’s an existing tariff that was lifted a decade or so ago, and ever since, tomato growers in the U.S. have complained that tomatoes grown south of the border are sold for less than it costs to produce them. This is called “dumping” and is technically a violation of NAFTA and its more recent revision.
The flood of cheap tomatoes from Mexico has decimated our domestic tomato industry (the U.S. is still the primary source of canning tomatoes, which are harvested mechanically). Growers have reduced their acreage or simply closed up shop and moved to…Mexico. For a number of years, organic growers were able to buck the trend as buyers were highly skeptical that most tomatoes grown in Mexico were actually organic. But that began to change in 2015.
Terra Firma has two pillars supporting it. The first is our CSA, which over the last ten years has been steadily shrinking. The second is our specialty tomato crop, which we sell to restaurants, retailers and distributors throughout Northern California.  That, too, has been shrinking.
The cost to grow hand-picked tomatoes in California has skyrocketed in the last 5 years, primarily due to wage inflation. Farmers here need prices to rise to match these increased costs. But wages in Mexico have not risen in over ten years, and organic tomatoes grown there are normally sold to U.S. buyers for below our cost of production.
It is my observation that U.S. consumers do not see much difference in price when their local retailer buys Mexican tomatoes instead of U.S. grown ones. The price is the same or similar, but the retailer pockets the very substantial difference. They hold off on buying locally grown tomatoes as long as possible. And when they do, they use the Mexican tomato price to force the local grower down in price. Last year, in several stores, I observed all summer that produce buyers were mixing Mexican tomatoes in their displays prominently stating “Locally Grown” in order to increase their profits.

For most human beings, it is very difficult to intentionally choose to pay more for something than they have to. And yet, a substantial number of consumers prefer to buy locally grown tomatoes and support the domestic industry. Especially given that farmworkers in Mexico have few of the rights and protections that tomato pickers in the U.S. have.

Given all this, it was a little disappointing to see that no California lawmakers signed on to the effort to reinstate the tariffs on Mexican tomatoes. Right now, anything other than full and complete opposition to any and all policies emanating from the White House is out of the question for Democratic politicians. That’s unfortunate, since California still produces more fresh market tomatoes than any state other than Florida.
The timing is not great. Most tomato growers in the U.S. have greatly reduced their production in recent years due to competition from imports. And because of the wet winter in California, tomato season here is going to be later than normal and supplies will be limited (TFF’s tomato season should start in about a month). The combination is likely to cause a large spike in prices that could create a backlash from the public. And the decision is coming at the tail end of tomato planting season — too late for farmers to expand their production accordingly.
I would like to see a long-term, sustainable solution that enables Terra Firma and other farms like ours to keep growing tomatoes into the future. I’m not certain that tariffs are the answer, but at this point anything that helps level the playing field is going to help.
Thanks,
Pablito

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