China loves Maine lobster, but Trump’s trade war means Canada is filling the demand
TIGNISH, PRINCE EDWARD ISLAND, CANADA — A gold and pink glow creeps over the horizon as Mandy Perry sets sail on her 43-foot boat. In the hours ahead, she and her two-man crew will tend to dozens of wooden lobster traps, plucking out the day’s flailing haul in an instinctive, fluid motion before restocking the traps with frozen mackerel and red fish and sending them back out to sea.
“When fishing does good, everybody else in the community does good,” said Perry, 30, one of a handful of female captains in these waters.
It’s here, off the coast of its smallest province, where Canada has emerged the surprise winner of a protracted trade war between the United States and China. Beijing’s tariffs on American lobster have gutted exports of the quintessential Maine delicacy, stripping the industry of its Chinese customers without any assurance they will return — and positioning Canada to fill the growing demand, perhaps permanently.
The U.S.-China trade war has upended supply chains around the world. But nowhere may that be starker than in the North Atlantic, where fishing communities that share a history and a way of life have been suddenly splintered. For generations, the maritime border between the United States and Canada has been more of a soft line between friends than a sharp divide between rivals. When it comes to lobster, each nation is the other’s largest foreign buyer.
Business flourished for both sides in the past decade as China’s growing middle class developed a taste for the succulent shellfish found in the upper reaches of the Atlantic. But after President Trump slapped tariffs on a wide range of Chinese products last year, Beijing retaliated with a 25 percent levy on $34 billion worth of U.S. goods, including American lobster.
In the first six months of 2018, before tariffs took hold, the state’s lobster shipments to China had shot up 120 percent year over year, according to the Maine International Trade Center. But from June 2018 to June 2019, after the duties were in place, overall exports to China tumbled 50 percent, with the biggest slump in live lobster, which dropped 81 percent, according to Wade Merritt, president of MITC.
Meanwhile, Canada’s lobster sales to China reached record highs.
The lobster trade is not the only American industry to see Chinese business siphoned away by the trade war. Soybean and cotton farmers are worried about losing out to Brazil, where China has shifted much of its business.
“The key issue is how long the trade disruptions between U.S. and China last,” said economist Mary Lovely of Syracuse University. “The longer they go on, the more the old networks atrophy and new networks get solidified.”
Fishing equipment and infrastructure line the wharf of Tignish Harbor.
Supplies of mackerel and redfish, both to be used as bait to catch lobsters, sit on the back of a boat off the coast of Prince Edward Island. (Photos by Tristan Spinski for The Washington Post)
LEFT: Fishing equipment and infrastructure line the wharf of Tignish Harbor. RIGHT: Supplies of mackerel and redfish, both to be used as bait to catch lobsters, sit on the back of a boat off the coast of Prince Edward Island. (Photos by Tristan Spinski for The Washington Post)
But the Canadians say they’re not relishing the boom: Not only do fishers and wholesalers here say they empathize with their American counterparts. But they’re also straining to fill the heightened demand for live lobsters on their own, a feat better accomplished by the cross-border infrastructure that’s been in place for years.
Though the United States and China in October reached a “phase one” deal to try to de-escalate the 18-month trade war, the agreement won’t affect the lobster tariffs. The bigger question is whether Canada will be able to hold on to its newfound dominance once the trade war ends.
“The longer this goes, the less likely it is that 100 percent [of the business] will come back,” said Sheila Adams of Maine Coast, a live lobster wholesaler based in York, Maine. “When Canada doesn’t have any natural competitors, they will get stronger.”
Mandy Perry, one of the few female captains in these waters, hauls lobster traps off the western coast of Prince Edward Island.
A view from a Tignish lobster boat.
A fisher sorts lobsters according to size. (Photos by Tristan Spinski for The Washington Post)
TOP: Mandy Perry, one of the few female captains in these waters, hauls lobster traps off the western coast of Prince Edward Island. BOTTOM LEFT: A view from a Tignish lobster boat. BOTTOM RIGHT: A fisher sorts lobsters according to size. (Photos by Tristan Spinski for The Washington Post)
‘Impossible to keep up at times’
Ten years ago, Canada’s lobster exports to China totaled only a few million dollars, said Geoff Irvine, executive director of the Lobster Council of Canada. But those figures nearly doubled each year as the Asian nation’s growing middle class latched onto the exotic and newfound status symbol.
Some wholesalers looked to operate on both sides of the border, in part to gain easier access to major airports in New York or Boston. The airport in Halifax, Nova Scotia, from which much of eastern Canada’s fresh seafood is flown around the world, is undergoing a massive cargo expansion to ease persistent bottlenecks. The boom has lifted Canada’s entire industry, fishers and processing plants alike.
In the first half of 2018, before the tariffs, lobster sales to China from the United States and Canada were about even, roughly $84 million, according to data from the Lobster Council of Canada.
But in the second half of the year, post-tariffs, Canada’s sales to China rose to $141 million, and the United States’ dropped to about $60 million. By June 2019, Canada was at $201 million and U.S. sales were nearly halved, to $33 million.
“We’ve just seen our business with China grow exponentially,” Irvine said. “Without the tariffs, it would have been business as usual.”
Still, Irvine said, Canadian exporters expect an eventual end to the trade war, which means not relying too heavily on Chinese buyers.
The sales growth also put further stress on the supply chain. Getting live lobster from a Canadian wharf to a Chinese buffet within days is an expensive and delicate venture that involves chilled water tanks, airfreight and speed.
“One of our major problems has been the logistics,” said Bob Ironside, vice president of operations at Flying Fresh Air Freight Cargo Halifax. “It’s just been impossible to keep up at times with the demand.”
Ironside estimated that shipments to China from his Halifax office have doubled since July 2018. He said he turns customers away every day because of the lack of space.
Francis Morrissey has fished in Tignish nearly his whole life and has managed Royal Star Foods, a plant cooperatively owned by about 200 local fishers, for the past decade. At any given time, Royal Star can house as much as 1 million pounds of live lobster in refrigerated, saltwater-filled containers, alongside 6 million pounds of processed and frozen products. It sells about $13 million worth of mostly live lobster to China each year.
The trade war, Morrissey said while nursing his coffee one recent morning, is “always on everyone’s mind.”
Like many others here, Morrissey feels for his American counterparts: “We not jumping for joy because of what’s happening to our fellow fishers,” he said. But holding on to a good customer — particularly one that buys in ever-growing volumes — is simply what a business does.
Morrissey typically flies three flags at the plant’s entrance: the Canadian Maple Leaf; the yellow, red and green banner of Prince Edward Island; and the stars and stripes of the United States to symbolize the long-standing ties between the two countries.
But on a recent morning, just ahead of a scheduled meeting with a Chinese client, Morrissey lowered the island’s banner. In its place he raised the familiar five-starred red flag until it fluttered in the seaside wind.
The Chinese, Canadian and U.S. flags fly outside Royal Star Foods, a plant in Tignish cooperatively owned by about 200 local fishers. (Tristan Spinski for The Washington Post)
‘We expect things will slow down’
The smell of seafood was thick in the air on a crisp September day in Borden-Carleton, population 720, on the southern shore of Prince Edward Island. There, on a tiny strip of coastline, Jason MacArthur was at his desk at By the Water Shellfish, a live lobster holding and shipping company founded in 2003.
In September, MacArthur said he had seen a 25 to 30 percent bump in sales to China since the tariffs, including from new clients rushing in and existing ones placing larger orders. MacArthur later said that figure was an estimate and likely high, though he could not provide specifics.
“But to be blunt,” MacArthur said, “once Trump’s tenure is over and the tariffs disappear, we expect things will slow down.”
The opening of a subsidiary in Kittery, Maine — meant to allow By the Water Shellfish to grow sales to China by shipping through Boston Logan International Airport — has given him a unique perspective of the trade war.
The tariffs took hold just as the subsidiary was opening last summer, meaning any lobsters sold there would be subject to Beijing’s tariffs. Now MacArthur is grappling with more Chinese demand than ever — and less shipping capacity to pull it off.
The Maine unit is doing decent sales within the U.S. market, MacArthur said. But, he added, “I think they could have definitely been increased if the Chinese market was open.”
Royal Star Foods sells about $13 million worth of mostly live lobster to China each year.
Herring is processed at Royal Star Foods. (Photos by Tristan Spinski for The Washington Post)
LEFT: Royal Star Foods sells about $13 million worth of mostly live lobster to China each year. RIGHT: Herring is processed at Royal Star Foods. (Photos by Tristan Spinski for The Washington Post)
‘We won’t get all of it back’
Ten miles from Kittery, Adams of Maine Coast and her husband, Tom, run their live lobster wholesaling business. She said the company spent more than five years cultivating the Chinese market. Last year, 20 percent of the company’s export sales were into mainland China.
Since the tariffs, 80 percent of that business is gone.
“You have to compete where you can,” Adams said. “Now we’re all competing in a much more finite market. You can’t ask Chinese customers to pay more for the same animal.”
Once the tariffs kicked in, Maine Coast accelerated plans to expand across southeast Asia and domestically. But other markets without the infrastructure to transport live seafood may not be as easily within reach.
The Adamses are keeping the lines open with their Chinese customers in the hopes that their steady stream of large orders will return. But it all hinges on how long the trade war persists.
“The lobster industry is super resilient, but there’s a fatigue factor from all the uncertainty,” she said. “You can build as great a business as possible. It doesn’t matter how good your business plan is.”
Plus, Mainers say, they were already apprehensive about competing with their northern neighbors after the European Union lifted tariffs on imports of Canadian lobster in 2017.
Economists say there’s reason to worry the trade war’s tail wind could outlast the war itself. In March 2002, the George W. Bush administration imposed tariffs on foreign steel imports. Christine McDaniel, an economist at George Mason University’s Mercatus Center, worked for the United States Trade Representative at the time, as steel prices rose and jobs in related industries declined.
Francis Morrissey, general manager of Royal Star Foods, gives a tour of the company’s facility.
Royal Star Foods can house as much as 1 million pounds of live lobster in refrigerated, saltwater-filled containers, alongside 6 million pounds of processed and frozen products. (Photos by Tristan Spinski for The Washington Post)
LEFT: Francis Morrissey, general manager of Royal Star Foods, gives a tour of the company’s facility. RIGHT: Royal Star Foods can house as much as 1 million pounds of live lobster in refrigerated, saltwater-filled containers, alongside 6 million pounds of processed and frozen products. (Photos by Tristan Spinski for The Washington Post)
The tariffs stayed in place until December 2003, and steel prices eventually went back down. But employment levels in steel-consuming manufacturing sectors never fully recovered, McDaniel found.
Granted, she said, it’s impossible to know how or whether Maine’s lobster industry will permanently suffer. But, she added, “it’s possible we won’t get all of it back.”
“Now is the time for Canadians to step up,” McDaniel said. “If you’re a Canadian company, you’d want to give it 110 percent to show you’re easier to do business with. They’re predictable. They have that going for them.”
The economic impact of just the lobster distribution supply chain exceeds $1 billion each year — or at least 1.6 percent of Maine’s GDP, according to Michael Donihue, professor of economics at Colby College. The total economic impact of the lobster industry in Maine, including the harvesters, restaurants and retail sales to customers, is much larger. And according to Maine’s congressional delegation, the state’s lobster industry supports the livelihoods of roughly 4,500 state-licensed lobstermen and more than 10,000 others who work within the trade.
The White House has, so far, resisted calls from Maine’s representatives to provide the industry some cover. Sens. Susan Collins (R) and Angus King (I) and Reps. Chellie Pingree (D) and Jared Golden (D) have urged the Trump administration to consider financial relief for the industry.
Earlier this year, when the Agriculture Department revealed the details of its $16 billion aid package for farmers affected by Chinese tariffs, the list covered dozens of commodities, including barley, corn, wheat and even hogs.
The lobster industry did not make the cut.
(Lawmakers are also concerned about proposed federal regulations to protect right whales that the state’s fishermen argue are based on incomplete science and would unjustifiably burden the industry even further.)
Yet Mainers say the state’s delegation can only do so much absent any action from the White House.
“It just seems to be something that is driven at the top,” said Annie Tselikis, executive director of the Maine Lobster Dealers’ Association. “The traditional mechanisms of advocacy and lobbying just don’t seem to be working for us.”
Sunny skies and high winds bathed the northwest coast of Prince Edward Island on Sept. 8, the day after the remnants of Hurricane Dorian passed over the island. The storm downed trees, damaged property and left thousands without power. (Tristan Spinski for The Washington Post)