Since the Boston Tea Party and the Revolutionary War, there has never been a tariff on tea in the United States… until now.
The Importance of China to the US Specialty Tea Market
It’s no secret that China is the world’s largest exporter of tea, and while tariffs are traditionally used to promote and protect domestic industry, tea is not exactly the kind of commodity that can be easily manufactured in the United States.
In fact, just last year, the US International Trade Commission revealed that China was the largest exporter of tea to the United States, even ahead of countries such as Japan and India, accounting for almost 1/5th of all tea imported to the US.
While 20% is already a staggering percentage, in reality, these numbers are actually even higher when tea is taken in the strict sense of camellia sinensis, not rooibos, herbals, and mate. For its accounting, the US ITC lumps all of these types together under the umbrella term “tea,” distorting the picture of China’s contribution to the US tea market.
Ultimately, the truth is that without Chinese tea, there simply is no way to accommodate the overall rising consumer demand in the states with domestic tea alone, let alone the demand for natural, hand-crafted, artisanal, high-quality specialty tea. As tea enthusiasts, we know how much the truly special teas of China — the green, black, oolong, pu-erh, and white teas; the renowned varietals such as Dragonwell green tea, Phoenix Dan Cong oolong, Wuyi Shui Xian, etc. — how much these teas are inimitable, aromas and flavors unable to be replaced.
What Exactly is the Problem?
Though rumors of an impending tariff on tea imports initially started as concerns within the industry, unfortunately, as of September 1st, 2019, these proposed changes have gone into effect – a 15% import tax has officially been levied on all teas imported from China.
There are some who might think that since the United States is the 3rd largest importer of Chinese tea (behind Russia and Pakistan), this could hurt the Chinese tea market as well, but this is wishful thinking. It is a fact that demand for tea in China and Europe has never been higher, and so any deficits from a taxed US market can easily be made up for elsewhere. So tea tariffs aren't going to do anything to China. Instead, all it does is hurting the US tea drinkers.
The Effects on the US Specialty Tea Market
Larger companies are unlikely to be affected much. So much of the tea found in inexpensive tea bags is purchased in bulk, coming at a discount due to economies of scale. A lot of this tea, also, isn’t purchased from China, instead made of cheap tea blends from inferior growing regions elsewhere in the world.
Besides large companies, in the US specialty tea market, there are three major groups of players: the US-based companies, the China-based individuals and companies (including some US tea companies operates in China), and pirates / counterfeiters. These latter two create websites geared towards US consumers, (often sell low quality teas,) and when an order is processed, they use their connections to ship directly from China, giving them a distinct advantage over US-based companies that follow the law. How these pirates and China-based tea companies manage to sell to the US market is another complicated issue. The short of it is that behind the scenes, they manage to operate at our own expense, and yet we can’t do anything about it.
Meanwhile, when political turmoil creates these kinds of economic consequences, it is the small- to mid-sized, US-based tea companies, especially those who import unique, artisanal teas from China like us, that will be affected the most.
Managing the Cost of Your Cup
The good news is that because much of this tea has already been sourced and imported for 2019, these new tea tariffs are unlikely to affect much just yet, but costs will surely rise in 2020. Unfortunately, this means that tea companies such as ourselves will need to begin thinking considerably about how to mitigate these costs since high quality specialty tea already has high price tag yet a low profit margin.
At MeiMei Fine Teas, profit has always been secondary to our mission: to make some of the world’s best teas available to you. You may not have realized it, but just last year, for instance, an import tax was levied on aluminum, affecting the purchasing price of our tea bags. But we were able to manage the cost.
In this case, we can assure you that we will be doing everything we can to manage the rising costs from these tea tariffs in 2020, and while we may be able to find a way to absorb some of the additional cost, at this time we cannot guarantee that we will be able to absorb all of the additional cost.
In the interest of transparency, we want you to be aware of some of the hidden economics and politics behind your cup, geopolitical factors that might inevitably raise prices. Our intention is certainly not to entice you to stock up on your favorite teas, but considering that some of these teas make excellent candidates for long-term storage, tasting better as they age – most notably pu’erh teas, white teas, and some oolongs – it may not be a bad idea to plan ahead by purchasing now and storing them for future consumption.