Chinese buyers hesitant to buy Alaska seafood as U.S. weighs another round of tariffs

Fishermen offload halibut in Homer. (Photo courtesy Rudy Gustafson)

In the first round of what seems to be an escalating trade dispute between the U.S. and China, tariffs have been levied on billions of dollars worth of goods in both countries. The Alaska fishing industry, which harvests roughly 60 percent of all wild seafood in the U.S., has been caught in the crosshairs of that disagreement.

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But it’s not the Chinese tariffs that’s giving the industry heartburn. It’s a proposed tariff on seafood imported from China.

The Alaska seafood industry has a unique relationship with China. Nearly $1 billion worth of Alaska seafood was exported into the country in 2017, but that’s just the first step in a global supply chain.

“So much of our exports to China are reprocessed and re-exported,” Garrett Everidge, a fisheries economist with the McDowell Group, said.

Everidge explains that after those fish are reprocessed, they’re exported into markets around the world, including the U.S. Although, it’s hard to discern from trade data just how much winds back up in the U.S. market.

China kept its relationship with the Alaska seafood industry in mind when it levied a 25 percent tariff on U.S. seafood earlier this summer.

“The majority of those exports are going to be excluded from those tariffs,” Everidge said.

The Trump administration is currently considering a list of retaliatory tariffs on $200 billion worth of Chinese goods. On that list is a 25 percent levy on seafood imported from China, including Alaska products reprocessed in the country.

“As of right now, there’s no indication that product originating in Alaska would be excluded from those import tariffs,” Everidge added. “It’s kind of an unusual situation where the U.S. would in effect be taxing production from a U.S. state.”

Jeremy Woodrow with the Alaska Seafood Marketing Institute explains just the possibility of that tariff is already causing Chinese fish buyers to hold off on purchasing seafood from Alaska, which may create a backlog of frozen product in the U.S.

“I’m not really sure the volume of backlog,” Woodrow said. “I just do know that there’s some uncertainty in the market and there’s some hesitancy to pull the trigger on those purchases by our traditional buyers that we already have set in place.”

Woodrow explains that processing any backlog domestically would be costly both in terms of labor and in the volume the state exports.

“It’s easy to assume that we would keep that product here in the U.S., but the unfortunate part is that there might not be the capacity to process that product in the United States,” Woodrow noted.

However, demand for Alaska’s seafood is high and other countries may fill the void left by Chinese buyers.

At least one major processor, who didn’t wish to speak publicly, confirmed that other foreign buyers are picking up some of that slack.

That’s good news, but the processor also says this year’s pink salmon harvest came in under forecast, and that it may be harder to sell larger volumes of fish if the dispute lasts.

Pink salmon tops the list of Alaska seafood imports into China in both volume and value. Alaska processors exported $170 million worth of pink salmon in 2017 alone.

Woodrow also warns that selling fish to non-traditional buyers could put a strain on Alaska’s relationship with the Chinese market.

“This could be a short-term deal, and you don’t want to move away from a market that has a lot of value and a lot of potential,” Woodrow explained.

If it’s not a short-term deal, that frozen backlog could grow large and prices on the docks could fall. Morgan Jones is a commercial seiner based in Homer. Inside his boat, Jones says prices have been good this year despite the trade dispute.

“The processors are still interested in buying all the fish we can get, and the initial price from last year is up a little bit,” Jones said. “So, we certainly haven’t see a negative impact yet.”

But ex-vessel prices are typically based on the previous year, and any impact on the docks is likely to be seen in 2019. Jones has seen this happen before. He recalls prices for pink salmon being cut in half after the U.S. sanctioned Russia after it annexed Crimea in 2014.

“That was a huge deal for us. We always pay attention and watch these things with concern,” Jones added.

The U.S. Trade Representative’s office is taking public comment on the proposed list of tariffs. Many in the industry want Chinese seafood dropped from the list or an exemption for products originating in the U.S.

A spokesperson with the office said in an email Friday that there’s no set timeline for the list to be finalized after the comment period ends on Sept. 6.

But previous rounds of tariffs have been finalized and implemented within just weeks of the comment period ending, which could have Alaska’s fishing industry bracing for more uncertainty.