Richie Thurston sorts lobsters while processing orders for local restaurants at The Lobster Co. in Arundel on July 27. Last summer, The Lobster Co. was exporting $100,000 of lobsters a day to China, but with new tariffs placed on U.S. lobster imports to China, owner Stephanie Nadeau said exports to that country have completely dried up. (Gregory Rec/Portland Press Herald)
America’s live lobster sales to China hit a two-year low in July, the first month a new tariff on Maine’s signature export took effect.
The United States shipped $4.2 million worth of live lobsters to China in July, a 64 percent decline from May and June levels, according to WISERTrade, a trade analysis firm. The data shows that what had been shaping up to be a banner year for U.S. lobster sales to China collapsed after July 5, when that country levied a 25 percent import tariff on U.S. lobster.
Before the tariff, the U.S. had sold $87 million worth of lobster to China, bringing 2018 year-to-date totals to more than double the $39.5 million worth of lobster the U.S. had sold to China during that same period in 2017, which had, up until 2018, had been the best year on record for live U.S. lobster exports to China, data shows.
This spring, some dealers were seeing a 120 percent year-over-year growth, according to the Maine Lobster Dealers’ Association.
“We had every indication China was going to continue to be a robust market opportunity,” said Annie Tselikis, the association’s executive director.
Maine dealers, who sell more than 80 percent of all the live lobster exported from the U.S., have been pushing politicians to repeal the U.S. tariffs on imports that prompted Chinese retaliation, meeting with the Maine congressional delegation, and the U.S. Trade Representative’s Office. More visits to Capitol Hill are in the works, but more tariffs are in the works, suggesting little movement.
Some dealers that have come to specialize in lobster exports to China, like Stephanie Nadeau at The Lobster Co. in Arundel, have been forced to lay off workers. Others, like Tom Adams at Maine Coast in York, are scrambling to find new markets for their products. Several Maine lobster companies went on a trade mission to Vietnam this month to build demand in that market.
The July data is the first to reflect the impact of the trade war on the Chinese lobster market, but it may not represent the full extent of it.
In the first week of July, in the days before the tariff went into effect, Maine lobster dealers reported a flurry of last-minute sales to China buyers. That means most of the $4.2 million in live sales reported to China in July probably came from that first week, before the tariff hit. A review of the trade data shows an average week of live lobster sales to China in 2018 had been about $3.4 million.
Many dealers say their regular three-to-four-times a week shipments of live lobster to China stopped after the tariff hit.
Nadeau said she has shipped eight small orders to China since the tariff drove her Chinese buyers into the eager arms of the Canadian lobster dealers, who sell the exact same thing with a slightly harder shell without a tariff. In pre-tariff times, Nadeau would have shipped more than 100 orders during that same two-month period, she said.
“I was kind of hoping as the Canadians ran out of lobsters, we would get some orders,” Nadeau said, referencing the end of the Canadian lobster season. “That has not happened.”
Instead, Canadian dealers are buying more Maine lobster and turning around and selling it to China, getting around the punitive tax on U.S. lobsters, Nadeau said. She likes the idea of dodging China’s retaliatory tax, but fears it will dismantle the American export airfreight industry, a trade infrastructure that Maine lobster dealers like herself count on to stay in business.
The Canadian purchases have stabilized boat prices, which helps Maine lobstermen, Nadeau said – but it doesn’t help U.S. dealers.
“We cannot compete with Canada in China or the EU, which is the lion’s share of the export business,” said Nadeau. She hopes that a strategic decision that she and her husband made to operate a debt-free business will help the 27-year-old company survive the tariff war. “The boats will survive. Many dealers will not. The longer it goes on, the more damage is done.”
Lobster was among the thousands of products that fell under new tariff regulations imposed by the U.S. and Chinese governments in a tit-for-tat trade dispute. Maine’s $1.4 billion lobster industry also has had to deal with a Canadian-EU trade deal that puts U.S. lobster at a 7 percent tariff differential with Canadian lobster in its second-biggest export market.
But Tselikis believes the industry is nimble enough to survive the market access challenges, much like it adapted to the challenges that it faced when the Sept. 11 terrorist attacks shut down air travel for weeks; the 2008 economic crisis that scared middle-class buyers out of a lobster dinner for years; and an early lobster molt in 2012 that caused a market glut that sent prices plummeting.
“I don’t see a single business shuttering their plant,” she said of Maine dealers. “They are making decisions that work for their individual company given the situation. They are innovative and creative businesses and they will find new opportunities in the U.S. or developing markets globally.”