Asian Grocers in U.S. Are Bearing the Brunt of China Trade War - EcoFinBiz Blog

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Asian Grocers in U.S. Are Bearing the Brunt of China Trade War

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(Bloomberg) -- Assistant Manager Dong Zheng paced the aisles of his Asian grocery store in Maryland with an urgent task: Slap higher prices on about 50 different items to reflect the latest tariffs in the U.S.-China trade war.

Among his targets at 99 Ranch Market in the Washington suburb of Gaithersburg: crispy broad beans, up 40 cents to $2.69, and Lee Kum Kee abalone sauce, jumping to $8.39 from around $5. The chain imports many of its goods from China, and the trade war may push prices higher on as many as 90 percent of the store’s products, Zheng said.

“Everything is impacted,” said Zheng, whose store is part of Buena Park, California-based Tawa Supermarket Inc. “It’s just too much.”

Ethnic supermarkets -- which include Asian, Hispanic and other retailers carrying many specialty products not sold in mainstream stores -- make up about 6 percent of the $622 billion U.S. grocery market, according to a report from market-research firm IBISWorld.

But for Asian-focused retailers, their dependence on Chinese products makes them particularly vulnerable to President Donald Trump’s escalating tariffs, including the latest round in September covering $200 billion of imports from the Middle Kingdom. With common items such as seafood, mushrooms and vegetables subject to levies, retailers have little choice but to raise prices to protect already-thin profit margins of less than 3 percent.

Asian supermarkets are “more fragile,” said Burt Flickinger, managing director of New York-based Strategic Resource Group and an adviser to U.S. Asian-grocery chains including 99 Ranch, Mitsuwa and H Mart. “China has historically exported more to Chinese and Asian retailers,” meaning “the impact for them is higher prices on imported products.”

Many Asian grocers are starting to outsource their specialty Chinese products or turning to produce grown in the U.S., but the process has been slow, Flickinger said.

The U.S. has engaged in a series of tit-for-tat tariffs with China since early July, when the president imposed duties on $34 billion worth of goods from the Asian nation. White House officials attributed the move as an effort to double down on China for unfair trade practices and alleged violations of U.S. intellectual-property rights, saying any short-term economic pain will be offset in the long run by ensuring a more equal playing field.

But retailers have expressed concern. “Every time this trade war escalates, the risk to U.S. consumers grows,” Matthew Shay, president of the National Retail Federation in Washington, said in a statement in September. Americans will notice “their shopping bills are higher and their budgets feel stretched.”

Around the aisles of 99 Ranch in Maryland, items whose prices have been raised in recent weeks are easy to spot, as the tags have a slightly different design. Among them: Dried noodles, Mongolia barbecue sauce, Pocky snacks, pickled black fungus and ginger honey crystals.

The Great Wall Supermarket in nearby Rockville also has felt the impact. Vendors started raising costs on Sept. 24, leading the store -- part of New York-based H&C Food Inc., which has more than a dozen locations -- to boost prices of dry spices, snacks, cooking wine and vinegar by 40 to 50 cents, managers there said.

“The trade war impacts a lot of places, especially Chinese grocery stores,” said Ruby Zhou, general store manager. “Everything goes up.”

Customer Jieli Tan of nearby Montgomery Village, Maryland, who shops at Great Wall at least once a week, is resigned to the trade war and the price increases.

“I have to eat, I have to deal with it,” Tan said. “You just can’t do anything about it.”

It may take a few months to determine just how much the trade war will impact 99 Ranch, said Zheng, the assistant manager at the Maryland store.

Until then, he will do all he can -- which, at this point, is putting up new tags.

“It’s a little bit extreme. These two countries are super countries. They’re exporting and importing a lot of goods,” Zheng said. “There’s not much I can do regarding the president’s decisions. I can only do my part. We can only see and watch.”

To contact the reporter on this story: Sarah Foster in Washington at sfoster94@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Scott Lanman, Jeff Kearns

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