Tariff threats between the United States and China boiled over into a trade war as U.S. and China government officials today levied billions of dollars’ worth of tariffs against each other. The Trump administration imposed $34 billion worth of tariffs on Chinese exports this morning; shortly thereafter, China announced its own retaliatory tariffs. More than 800 Chinese exports now face steep U.S. tariffs of up to 25%, with another 284 products potentially subject to a second wave of U.S. tariffs in the near future. News is still to come from China about exactly which U.S. exports are now subject to new tariffs. The U.S. food and dietary supplement industries, which heavily import ingredients from China, have been on high alert for months to see whether trade tensions would escalate into a trade war. Nutritional Outlook spoke with Scott Steinford, executive director at large of the CoQ10 Association (Salt Lake City, UT), about how trade tensions could negatively affect U.S. and China consumers.
CoQ10 “Dodged a Bullet”
Steinford estimates that up to 90% of the dietary supplement ingredients used in U.S.-manufactured products come from China. Steinford knows firsthand how the brewing trade war threatens some of the dietary supplement market’s major ingredients. Take CoQ10. Much of the U.S. CoQ10 supply comes from China. CoQ10 came close to the tariff fire on April 4 when the U.S. released its initial list of proposed tariffs against China. CoQ10 was one of the ingredients on the list. Steinford says the CoQ10 market was relieved when the Office of the United States Trade Representative released its final tariff list on June 15. CoQ10 was removed from the list.
“The CoQ10 ingredient manufacturers and retailers were caught off guard to the possibility CoQ10 would be considered for tariff inclusion,” Steinford says, describing how his association submitted comments voicing objection to the April 4 list. In its comments, the association stated, “Tariffs on supplement ingredients in general do not have a positive impact on either the U.S. economy or consumer. Most tariff considerations support the return or protection of U.S. jobs. Neither of those issues can apply to supplements, as there is no U.S. industry for most ingredients.”
In the case of CoQ10, Steinford says the U.S. only manufactures approximately 10% of the total CoQ10 market, with U.S. CoQ10 “priced from 100% to 1000% above the Chinese-produced material.” As such, he says, “a 25% tariff would not likely result in great consumer adoption of the U.S.-manufactured material.”
“It would be wonderful to definitively believe that CoQ10 would not appear on any future lists,” he adds. “However, without clear understanding to what logic led to its inclusion on the tariff list, it is impossible to predict future logic.” Along with CoQ10, vitamin B and E ingredients were included in the proposed April 4 list but were later removed in the final release.
The Bigger Picture
Steinford highlights the long-term negative effects of a trade war with China on the U.S. supplements industry. Already, he says, trade tensions have been heating up in court over some ingredients the U.S. heavily imports from China.
Take vitamin C. On June 14, the U.S. Supreme Court intervened in a vitamin C price-fixing case between several U.S. vitamin C importers suing Chinese vitamin C suppliers, alleging price fixing. Initially, a court in Brooklyn, NY, awarded $150 million in damages to the U.S. companies; however, an appeals court threw out that decision following statements from China’s Ministry of Commerce, which defended the Chinese companies and claimed that the Chinese government had ordered those companies to set their prices via regulations. The court’s rationale was that the Chinese companies could not be punished if their own government had ordered them to act accordingly. On June 14, however, the Supreme Court reversed the appeals court decision, ruling that the price fixing is, in fact, punishable.
This decision was a victory for U.S. vitamin C importers, but such trade tensions like these, in addition to the now raging trade war, could have a more serious negative impact, Steinford says—namely, that Chinese consumers, who generally largely prize U.S. dietary supplement products, could sour on U.S. exports.
And, he says, both Chinese and U.S. consumers will suffer from increased cost of goods. If, for instance, CoQ10 had been the subject of final tariffs, “the most likely impact a tariff on CoQ10 could provide would be a reduction of the total CoQ10 market and an increase to consumer pricing.” Ultimately, he says, “in the case of CoQ10, the supplement most recommended by cardiologists, the increased cost will potentially impact the lives of people who depend on the ingredient regardless of the country of origin.”
CoQ10 may have escaped the tariff war for now, but many more ingredients heavily used by the U.S. food and supplement market remain in the crosshairs, including U.S. soybeans, now the subject of steep tariffs by China. Dietary supplement and nutrition product manufacturers will continue bracing itself amidst this growing trade war.
Steinford says: “The current trade rhetoric between the U.S. and Chinese governments is only the surface of trade discussions that are carried out on behalf of the two nations’ economies. The tone and tenor set by the Administration’s words and actions affect the outcomes and attitudes of the actual conversations leading to transactions. It remains to be seen how the current events impact future outcomes, but it would seem advisable both sides should work towards mutually beneficial actions and words.”