Trump’s Tariff Proposals Would Sting U.S. Olive Oil Consumers

Summary

The U.S. pres­i­den­tial elec­tion is close, with Trump main­tain­ing his belief in tar­iffs as a use­ful tool, even though Treasury Secretary Janet Yellen warns against blan­ket tar­iffs. The poten­tial impact of tar­iffs on olive oil imports from Spain is a con­cern for American con­sumers and pro­duc­ers, with con­flict­ing opin­ions on how tar­iffs would affect the indus­try.

The United States pres­i­den­tial elec­tion is less than three weeks away, and the major can­di­dates are vir­tu­ally tied in the pop­u­lar vote and within the mar­gin of error in six swing states that will ulti­mately decide the elec­tion.

Former President Donald J. Trump is run­ning for the third con­sec­u­tive cycle. While many of his domes­tic and for­eign pol­icy pri­or­i­ties have shifted over the past decade, his deeply held belief that tar­iffs are a use­ful tool at the dis­posal of the exec­u­tive branch has remained con­sis­tent.

While Trump was pres­i­dent in 2019, he approved a 25 per­cent tar­iff on some Spanish olive oil imports in retal­i­a­tion for European sub­si­dies for air­craft man­u­fac­turer Airbus, which the World Trade Organization said put American air­craft man­u­fac­turer Boeing at a com­pet­i­tive dis­ad­van­tage.

After an agree­ment was reached, the tar­iffs were sus­pended. Still, many pro­duc­ers and large importers are wary of what another round of tar­iffs would do to the U.S. olive oil mar­ket.

“Donald Trump has pro­posed a ten per­cent tar­iff on all imported goods to off­set eco­nomic dis­tor­tions cre­ated by for­eign gov­ern­ments, to reduce America’s trade deficit and to speed up its rein­dus­tri­al­iza­tion,” Robert Lighthizer, Trump’s U.S. trade rep­re­sen­ta­tive, wrote in The Economist. ​“Experience sug­gests that this will suc­ceed and that high-pay­ing indus­trial jobs will be cre­ated.”

Since Lighthizer’s state­ment, Trump has, on var­i­ous occa­sions, also sug­gested a 20 or 60 per­cent tar­iff on all imported goods. ​“To me, the most beau­ti­ful word in the dic­tio­nary is tar­iff,” Trump, who pre­vi­ously referred to him­self as ​“Tariff Man,” told Bloomberg. ​“It’s my favorite word.”

However, cur­rent Treasury Secretary Janet Yellen warned that blan­ket tar­iffs would fuel infla­tion and harm busi­nesses.

“Calls for walling America off with high tar­iffs on friends and com­peti­tors alike or by treat­ing even our clos­est allies as trans­ac­tional part­ners are deeply mis­guided,” Yellen said in a speech to the Council on Foreign Relations. ​“Sweeping, untar­geted tar­iffs would raise prices for American fam­i­lies and make our busi­nesses less com­pet­i­tive.”

On the other side of the Atlantic Ocean, strate­gic con­sul­tant Juan Vilar said bot­tlers based in the United States would bear the cost of the tar­iff, and it would be up to them whether or not to pass it on to con­sumers.

“A tar­iff would affect how Americans use olive oil,” Vilar said. ​“Olive oil con­sump­tion in the United States will fall. The price of olive oil in the United States will rise.”

“It makes no sense to put tar­iffs on a prod­uct like olive oil,” he added, since the U.S. imports about 97 per­cent of the olive oil it con­sumes.

Vilar said he was uncer­tain what the impact of the tar­iffs would be on Spanish exporters but added it would not be good since the U.S. is the sec­ond-largest olive oil con­sumer and the lead­ing des­ti­na­tion for Spanish exports.

“It is not a good sit­u­a­tion, of course not, and these mea­sures would result in a less rapid recov­ery of prices [in the U.S.],” Vilar said. ​“It would not be good for the Americans or the Spanish, Italian and Greek olive oil pro­duc­ers.”

Back in the U.S., the founder of a New York City-based olive oil importer agrees with Yellen and Vilar.

“The olive oil indus­try would take a big hit, and it’s already taken a mas­sive hit in increased costs and prices in the last two years,” the founder said.

“I don’t think there’s any­one in the olive oil indus­try who isn’t fully aware of how expen­sive oil has got­ten in the last two years… and that cou­pled with infla­tion and the ris­ing costs of mate­ri­als, the olive oil indus­try does­n’t need another cost increase fac­tor right now,” they added.

After all, extra vir­gin olive oil has lim­ited house­hold pen­e­tra­tion in the U.S. – esti­mated at 45 per­cent – and any mea­sures taken to increase the cost with lit­tle ben­e­fit for any­one else in the indus­try are unwel­come.

“It’s an already expen­sive prod­uct, and it does­n’t need to be more expen­sive,” the founder said. ​“I think every­one can agree on that.”

However, the chief exec­u­tive of a large California olive oil com­pany said tar­iffs might not hurt U.S. olive oil con­sump­tion as much as some fear, bas­ing this claim on con­sumer resilience dur­ing the recent con­ver­gence of infla­tion and his­tor­i­cally high olive oil prices.

“Any tar­iff is going to get passed on to the con­sumer,” they said. ​“It’s only going to lead to higher costs. Arguments in the past that the con­sumer can’t bear a higher cost have been dis­proven with the amount of infla­tion expe­ri­enced in the past two years.”

The exec­u­tive cited data show­ing that the extra vir­gin olive oil cat­e­gory is grow­ing at two per­cent annu­ally at retail, even as prices have risen between 25 and 30 per­cent.

“In years of mas­sive infla­tion, con­sumers have absorbed [price rises],” the exec­u­tive said. ​“It’s been a very resilient cat­e­gory.”

“The argu­ment that extra vir­gin olive oil and olive oil pro­duc­ers can’t raise prices, which was the argu­ment against the tar­iffs in the first place, is not true,” they added. ​“Still, I don’t think there should be tar­iffs. I’m not sure that they will have the intended impact.”

“Tariffs end up hurt­ing the U.S. con­sumer because it’s tak­ing money out of their pocket for some­thing that’s not going to slow down imports,” the exec­u­tive con­cluded.