Here & Now

Chinese Trade Disputes Impact Wisconsin Ginseng

Frederica Freyberg:

Now to more economy-related news and a trade visit to Wisconsin by Vice-President Mike Pence. The vice-president appeared at Uline, a distributor of packaging materials in Pleasant Prairie. He used the occasion to encourage support for the U.S./Mexico/Canada Trade Agreement. The plan awaits Congressional approval. Meanwhile, the U.S. trade war with China is hitting Wisconsin ginseng producers in a big way. In tonight’s inside look, how China’s retaliatory tariffs and value-added taxes on Wisconsin ginseng have rocketed to a 41% added fee, making the coveted product more expensive for buyers, many of whom say the farmers should absorb the increased cost. So where does this leave Wisconsin ginseng growers who export 85% of their $30 million crop to China and Hong Kong. We check in with Will Hsu whose family operates a 1,000-acre ginseng farm north of Wausau. Thanks for being here.

Will Hsu:

Thanks for inviting me.

Frederica Freyberg:

So what has been the effect of the U.S. trade war with China on your ginseng farm?

Will Hsu:

Well, I think for the overall industry, what it’s meant is the processors and purchasers in China have really asked those of us here in central Wisconsin to absorb the brunt of the tariff, meaning the prices that farmers are receiving here are about 30% to 40% lower than they were the last couple years.

Frederica Freyberg:

So what kind of losses does that represent?

Will Hsu:

For our industry, a 30% to 40% price decrease probably means that the local economy here is losing somewhere between $10 and $15 million that’s infused directly to the farmers. And those farmers buy a lot of their equipment locally. We buy vehicles, trucks, tractors and we employ a lot of people here in central Wisconsin. And so it does mean that we’ve had to find ways to maybe trim costs and not use as much labor or not hire as many people.

Frederica Freyberg:

What do you think of the U.S. trade policies that brought you to this place?

Will Hsu:

I think most of the farmers here in central Wisconsin, regardless if you’re talking about ginseng farmers or other producers, understand the need to have fair trade, and they may support the Republican administration in terms of what they’re trying to do to level the playing field with China. I think the difficult part of that is how it is impacting us personally and financially. I think a lot of farmers feel that pinch. They feel the brunt of the trade war. And they’re having to take it in the pocketbook because of our broader national policy and trade strategy.

Frederica Freyberg:

Now, President Trump announced a trade deal with China earlier this month. How optimistic are you that that might bring some relief here?

Will Hsu:

Umm, I guess it’s hopeful optimism. We’ve heard it before. I don’t know if I can necessarily count on it and bank on it. I think, you know, you have a difference in regime. You have a Chinese premiere, who for lack of better word, doesn’t have to face re-election and you have a president that’s going to have to face re-election next year. So if you look at the short term versus the long term, I think we’re playing two different games.

Frederica Freyberg:

You are just harvesting now. How does this year’s crop look?

Will Hsu:

This year, because of the weather, which no one can control, the crop yield is not as good as it has been in previous years. So my guess is that the overall poundage may be down a little bit. I think you’re seeing more farmers save roots for an additional year, meaning saving three-year-old roots that you would normally harvest for four-year-olds and saving four-year-old roots that you would normally harvest for five-year-olds with the hope that a trade deal is done and that prices are better and recover next year.

Frederica Freyberg:

Have you sold your ginseng crop?

Will Hsu:

Most of the crop that we harvest ourselves is used internally within our own operation for our own customers. I would say that there are a few farmers that still have crop left over from last harvest, so 2018 harvest. And some of the new crop is just starting to come on the market. And we are seeing some softness and weakness in price as the trade war drags on and it continues to have a downward pressure on the overall market price for ginseng, especially for the new 2019 crop that’s just coming out of the dryers.

Frederica Freyberg:

I know that Foxconn signed an agreement with the Wisconsin Ginseng Board and yourself to promote Wisconsin ginseng in foreign markets and produce the company’s own brand of ginseng. What has been the outcome of that agreement?

Will Hsu:

So I think in some regards to the trade war, what we’re seeing with Foxconn is that they are doing that agreement in Taiwan. So they are purchasing product from us, either here in Wisconsin or from our operations in Taiwan, and marketing and selling that root in Taiwan. But because of the impact of the tariffs on imports into China, they aren’t really aggressively pursuing any options in China. And China is one of their biggest markets and one of our biggest markets. So it is a missed opportunity with that trade agreement with Foxconn primarily because of the trade war. But it’s a side effect of what’s going on nationally.

Frederica Freyberg:

Did Foxconn end up investing in high-end inspection technology and production capabilities at your farm to produce its ginseng?

Will Hsu:

No. They have not. To date, they have not. And I think part of it is just because the volume that they need to satisfy the Taiwan market is very small versus how big they expected the Chinese market to be in mainland China.

Frederica Freyberg:

Just very briefly, should the trade deal with China be realized, can your markets and losses be recovered?

Will Hsu:

I think some of the market losses will be recovered immediately, but the long-term effect is pretty damaging. It took us 20 years to develop the China market. They are still our primary consumer. They will still come back. But what it has allowed is the producers of American ginseng in China and in Canada to really step in with what isn’t necessarily lower cost, but it’s lower cost to the consumer. Meaning because of the additional 40% tariff that are on ginseng, it gives them additional margin to operate and really make them successful in the short term because they do not have to price compete with us given that we have a 40% tariff on our product.

Frederica Freyberg:

Right. We need to leave it there. Will Hsu, thanks very much and good luck.

Will Hsu:

Thank you.