Trade talks between China and the United States fell apart a few weeks ago. Now, the two countries are promising to levy new tariffs on each other’s goods. One commodity caught in the crosshairs: American-grown ginseng root.
People who use ginseng often take it by steaming whole root or slices for teas and soups, steeping tea bags or ingesting pills or other products. It's a known component of traditional Chinese medicine. And Wisconsin growers produce more than 90 percent of the U.S. crop.
Will Hsu, president of Hsu's Ginseng in Wausau, says the trade war with China has had a dramatic impact on ginseng farmers in central Wisconsin. He says that's because about 90% of the ginseng grown in Wisconsin is exported to greater China — mainland China, Taiwan and Hong Kong.
"Now the tariff only applies to ginseng directly imported into China," Hsu adds. "Probably anywhere from a third to half of the ginseng grown here is sent to China for processing. So those sales have declined precipitously in the last six to nine months, as we've been going through the trade war and as tariffs have been escalating."
He says the price that local ginseng farms have been getting for their crop over the last six months has been 20-30% lower than what it was in 2017 and 2018.
As a result, farmers, Hsu says, will start to plant less this year, with some farmers taking on debt or tapping into equity that they've built up over the past years.
The Wisconsin ginseng industry hasn't seen a market like this since the late 1990s when Canada increased its supply and flooded the market, says Hsu. But he says this current situation isn't one caused by oversupply.
"Demand has been pretty steady the last 5-10 years. This is an external shock from the standpoint of adding what was initially a 20% tariff, and as of June 1 will go to an additional 10%, so an additional 30% tariff that was on ginseng into China."
It takes three to five years for ginseng crops to reach maturity. "So we will have to wait out it out, regardless, because we've already made decisions to plant and maintan acreage that that we expected to sell," Hsu explains.
"What it will impact is the number of farmers that are still around three to five years from now," he says.
Hsu says the last time there was this type of price shock and decline in the market, the state felt the effects. "Wisconsin went from over 1,000 farmers growing ginseng to today, there's probably about 150-180 of us. I'm not sure how many farmers and farms you can lose in this industry before we don't have either a viable or a sizable enough crop to make a difference."
He says his company is working with farmers to help them find ways to move the crop into different markets or to find different customers.