With the new announcement, there are now four lists of goods imported from subject to different levels of tariffs. The latest list includes some botanical ingredients that go into dietary supplements.
NPA: Exemption process works
Daniel Fabricant, PhD, president and CEO of the Natural Products Association, said NPA is generally supportive of the President’s actions in the trade war with China.
“We can’t continue to have a trade deficit where China pays a 2% tariff and US companies are dissuaded from entering the Chinese market because of high tariffs. We are supportive of what the White House is doing,” Fabricant told NutraIngredients-USA.
“But we are going to continue to work for an exemption process. We fought for an exemption process on the earlier lists, and we will continue to work for one on list four,” Fabricant said.
Fabricant mentioned two ingredients—sucralose and glucosamine—which were included on earlier lists and which were granted exemptions. An exemption would be based on whether there was no reasonable alternative route of supply for that ingredient. That could be because it occurs nowhere else as might be the case for some endemic herbs. Or an appeal for an exemption might be based on the idea that building a domestic factory to produce the ingredient would be too expensive and time consuming.
“List three was probably the bigger hit financially, because it included some amino acids. But we were able to argue successfully for those exemptions. That’s why people need to be members of trade associations, and they need to say involved,” Fabricant said.
New tariffs will eventually affect prices at the shelf
Wilson Lau, vice president of sales and marketing at Nuherbs, said the impact of the precise impact of the 10% tariff list remains to be seen, but it’s not good news for his business. Nuherbs specializes in importing botanical ingredients from China.
Lau said that with the multiple stops in the typical supply chain, a 10% increase in ingredient costs could probably be mostly absorbed before a product hits the shelf, with each player taking on a bit of that burden. But at some point in time, the consumer will have to pay, he said.
“The consumer will see it in one shape or another,” Lau said.
Importers like Nuherbs are trained to cope to some degree, Lau said. Some of the materials it sells had already landed on the earlier, 25% tariff list.
“I was talking to some Chinese suppliers before the last list went into effect. And we agreed, yeah, 25% is going to hurt. But what’s the alternative? You can pay 1.25 times as much for something from China, or you can pay three times as much buying it from Japan or four times as much from Germany,” he said.
Stock traders reacted negatively to the news of the new tariffs. Just a few weeks ago, it appeared that the two sides were headed toward an agreement, but Trump apparently became frustrated with the slow pace of negotiations and by what he characterized as Chinese backsliding. International markets took a sharp downturn yesterday, and some prognosticators said the new tariffs would cut US GDP growth by more than 1%.
Rebalancing seen as necessary move
But it’s not all doom and gloom. Even though some US-made dietary supplement finished goods have enjoyed success in China with an aura of quality and trustworthiness, on the supply side there have been grave questions as to the fairness of the trade system between the two countries. Past administrations could perhaps have been accused of sweeping these concerns under the rug, urged on by stakeholders who wanted access to goods at the lowest possible cost.
George Pontiakos, president of BI Nutraceuticals, one of the biggest botanical ingredient suppliers in the market, said the rebalancing on tariffs has been a long time coming.
“As a US-based manufacturer of raw materials, BI welcomes the tariffs as it places our business on a more level playing field with Chinese brokers and middlemen,” Pontiakos said.
