Apples to Mexico

Bernabe Rodriguez prepares a pallet of Gala apples for shipment to Mexico at Washington Fruit and Produce Co. on Nov. 5, 2015 in Yakima.

Most things sold at Dollar Stretcher in Yakima are in the $1 to $2 range.

For that price, shoppers can buy a wide variety of items, including a small pack of diapers, spices, gift bags and a bag of candy.

Offering such low prices means tight margins for owner Sukant Khullar. And tight margins offer little to no room to absorb rising product costs.

If President Donald Trump follows through on his plan to impose a 5 percent tariff on all Mexican products on Monday, Khullar says that may lead to higher costs for Mexican-made products such as candy, fabric softener and paper towels that he sells at the store at 501 W. Lincoln Ave.

“If the (suppliers) raise the prices, we’re forced to raise our prices,” he said.

That’s terrible news for low-income customers who are on a tight budget, he said.

News of Trump’s proposed tariff, which could potentially rise to 25 percent by October, has prompted concerns from business owners.

“I’m sure he has his reasons,” said Chris Brown, owner of Wray’s Marketfresh IGA, which has four locations in Yakima and Selah, about Trump’s proposal. “But it affects a lot of people.”

The timing in summer months won’t been as severe because domestic fruits and vegetables are widely available, Brown said. Still, Wray’s stocks some Mexican-grown produce, and Brown expects the cost for those items to increase if there is a tariff. Some suppliers may increase prices sooner if demand surges in anticipation of a duty, he said.

In that case, Wray’s either has to absorb the cost — and realize lower profit margins — or pass the cost on to consumers.

“People only have so much to spend,” Brown said. “It will affect how much they can buy.”

Washington-grown fruit

News of the tariff created some whiplash in the tree fruit industry, said Mark Powers, president of the Northwest Horticultural Council, a Yakima-based organization that represents the Northwest tree fruit industry in public policy issues, such as trade.

“I think everyone was surprised; nobody saw this coming,” Powers said.

Just two weeks earlier, industry officials sighed with relief when the U.S., Mexico and Canada came to an agreement that ended the U.S.’s tariffs on steel and aluminum produced by the two countries and any tariffs they imposed in retaliation. That included a 20 percent retaliatory tariff on U.S. apples to Mexico, the largest export market for Washington state apples.

While the proposed tariff itself isn’t much, it’s still another trade issue that creates uncertainty for the industry, Powers said. The Trump administration also recently ended preferential trade status for India, ending duty-free access to the U.S. for billions of dollars in products.

Halting that benefit, along with a tariff the U.S. imposed on steel and aluminum, may prompt India to finally impose a 25 percent tariff on U.S. apples, which would bring the total duty to 75 percent.

The country first announced plans to impose the tariff last year, but deferred action while it tried to resolve trade issues, Powers said.

“It’s certainly not a situation our growers want to be in,” he said. “They want these trade problems resolved to let them get back to the business of selling fruit domestically and globally without government harming (them).”

Still, Powers said he hopes for a last-minute resolution between the U.S. and Mexico — or if the tariff does happen, that Mexico opts not to retaliate, at least initially.

Khullar, the Dollar Stretcher owner, said he was relieved that an ongoing trade war against China has not led to a price increase for the Chinese-made products he sells in his store.

He said he’s “crossing fingers” for a similar result if the U.S. decides to follow through with the tariff against Mexico.

“If the companies don’t raise prices after the tariff, we won’t raise prices,” he said.

Reach Mai Hoang at maihoang@yakimaherald.com or Twitter @maiphoang