'It’s Bad News for Us:' Arizona’s Farmers, Manufacturers, Brewers Among Trade War’s Victims

Aug 17, 2018 - 1:30pm

Dick Walden is a third-generation pecan farmer in Sahuarita, AZ, where his family owns and operates the sprawling 4,500 acre Green Valley Pecan Farm. He and his fellow Arizona farmers produced more than 28 million pounds of pecans last year alone, a large share of which was sold to customers overseas.

Now, with the escalating trade war and ever present threat of more tariffs, Walden’s business and the state’s entire agricultural industry are at risk.

“There are many unintended consequences due to the ripple effect of imposing tariffs and then having a tit-for-tat retaliatory tariffs from our trading partners,” Walden told a local newspaper. “I’m greatly concerned.”

China, Mexico, Canada, and the European Union have all retaliated or announced plans to retaliate to the administration’s recent wave of tariffs with billions of dollars in taxes on American-made products. As a result, Green Valley, which exports about 60% of what it grows, could soon face a 47% tariff.

Due to the uncertainty sparked by the trade war, Walden says Green Valley has started looking to cut costs and delay major capital investments. The threat of more tariffs, he said, “might have a significant negative impact on our business.”

Walden is one of a rapidly growing list of business owners across Arizona who have fallen victim to the trade war. Nearly 770,000 jobs across the state depend on trade. Stefanie Smallhouse, president of the Arizona Farm Bureau, says nearly a quarter of Arizona products are exported. Retaliatory tariffs threaten approximately $266 million of those exports, according to analysis published by the U.S. Chamber.

Like pecan producers, Arizona’s cotton farmers are bracing for impact or already feeling the sting from the trade war. Cotton is one of the state’s largest crops, and approximately 70% of Arizona’s cotton exported, 20 percent of which heads to China.

“There is no doubt that retaliatory tariffs on agricultural products are going to have a huge impact on Arizona’s agricultural economy,” Philip Bashaw, CEO of the Arizona Farm Bureau, said in a recent interview.

Farmers aren’t the only victims, either. The manufacturing industry has taken a big hit from the nation’s new tariffs on imported steel and aluminum, as many firms –including a large number in Arizona –use those materials to produce their finished goods.

“For all those companies, their prices have shot up pretty considerably in the last several months,” said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry.

One of those hard hit manufacturers is Doug Cone, co-owner of distributor Arizona Metals in Mesa. He warns that due to the already tightened supplies that resulted from the tariffs, construction delays and cancellations are expected in the upcoming months.

Mark Fultz, vice president and general manager of Able Steel Fabricators in Mesa, echoes the same concern, calling the new tariffs a “lose-lose proposition.”
Similar concerns are brewing within Arizona’s beer-making industry. Nearly all of the equipment used in a brewery is made from steel, and any brewery that uses cans will have to face the 10% aluminum tariff, to boot. Brewing tanks, stainless steel systems, and kegs will be impacted by the 25% steel tax.

“All breweries will be negatively affected,” but particularly the small ones that can’t adapt quickly enough to the price increases", says Rob Fullmer, the executive director of the Arizona Craft Brewers Guild.

The results can be paralyzing for new and small brewery businesses, as many of them are right at the price margin for operations and may be unable to handle these price changes, Fullmer explained.

Mat Trethewey, who owns a Mesa-based brewery called the Beer Research Institute, is already feeling that uncertainty. “In general, tariffs don’t really make economic sense,” Trethewey said. “They don’t help anybody and just stifle growth and ingenuity, so it’s bad news for us.”

Soon, even more businesses will start to feel the rippling consequences of the deepening trade war, according to Walden, the pecan farmer.

“Local businesses that sell groceries, tires, and so on may ultimately see an impact on their local business as businesses like ours, which have a major stake in the export market, are forced to adjust,” Walden explained. “Maybe we’ll use less diesel, maybe we’ll use fewer tires, maybe we’ll delay the acquisition of new tractors and replacement trucks for a year or two.”

He continued: “Our government and the administration need to seriously think about the impacts their having on families, employees and companies.”

About the Author

About the Author

Intern

Isabelle Lavin is a student at the University of Virginia.