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How U.S-China trade war is pinching profits for Maine’s lobster industry

Trade tensions between the U.S. and China are not expected to ease anytime soon, and in New England, tariffs are clawing away at lobster profits. Lobstering is a $1.5 billion industry that helps keep Maine’s economy afloat. But due to China’s retaliatory 25 percent tariff on U.S. crustaceans, it’s Canada that is gaining the competitive edge. Economics correspondent Paul Solman reports.

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  • Amna Nawaz:

    Even with trade negotiations set to resume next month, the trade and tariff wars between President Trump and the Chinese government are not expected to end any time soon.

    Among the industries where the tariffs are clawing away at profits is the lobster business.

    Economics correspondent Paul Solman reports from New England on the unusual twists of this story, part of our regular series Making Sense.

  • Dave Laliberte:

    See the claw growing back right here?

  • Paul Solman:

    Oh, that's a little new claw.

  • Dave Laliberte:

    This one and that one.

  • Paul Solman:

    Oh, that is soft, and…

  • Dave Laliberte:

    Yes, it kind of feels like a gummy bear.

  • Paul Solman:

    Out on Casco Bay off Portland, Maine, with Dave LaLiberte, hauling lobster traps.

    That's the smallest lobster I have ever seen.

    Snaring mostly throwbacks.

  • Dave Laliberte:

    In order for us to keep a lobster, it's got to be three and a quarter inches across the back. That's called the carapace. So, there we go. We have got a keeper.

  • Paul Solman:

    Lobstering is a $1.5 billion fishery helping keep the state of Maine's economy afloat.

  • Dave Laliberte:

    One, two, three, push.

  • Paul Solman:

    But last July:

  • Woman:

    China in fact did retaliate with its own tariffs immediately after the U.S.' move.

  • Paul Solman:

    The profit-trusty crustaceans became a target of the trade war.

  • Woman:

    Described as the largest trade war in economic history.

  • Paul Solman:

    A 25 percent retaliatory Chinese tariff on the auspiciously red and dragon-like foodstuff that, over the past decade, has become a Sino sensation.

  • Yang Ning (through translator):

    Lobster is a top-quality food product that we are using as the main selling point in our buffet, because our guests are used to thinking that eating lobster should be something that they should pay a lot of money for.

  • Paul Solman:

    But not, it seems, an extra 25 percent. So, lobstermen like Dave LaLiberte are becoming desperate, no?

    No.

  • Dave Laliberte:

    Right now, the boat price is around $4 a pound. That was the price in 2018, as well as 2017.

  • Paul Solman:

    The tariff was put in a year ago. No effect?

  • Dave Laliberte:

    We haven't seen an effect on the boat price yet.

  • Paul Solman:

    But how can this be? China had been taking an ever-bigger chunk of the local lobster catch, snapping up nearly half of Maine's exports.

    And that's the economic puzzle that brought me to Casco Bay: How can the price of lobsters not have dropped, given suddenly drastically lower demand?

  • Stephanie Nadeau:

    Lobstermen aren't really being affected by this, because Canada is buying our U.S. lobsters, tagging them as Canadian, and shipping them.

  • Paul Solman:

    And that, says Stephanie Nadeau, a wholesaler who buys at the dock and sells to the world, is the answer to the puzzle.

    And here they are.

    China's still getting its lobsters, even those from Maine, but not from American wholesalers.

    So, you mean that Canada gets the business that the United States used to get?

  • Stephanie Nadeau:

    Yes.

  • Paul Solman:

    Period?

  • Stephanie Nadeau:

    Period.

  • Dave Kaselauskas:

    Here's a Canadian lobster, and here is the American lobster, each costing $4.

  • Paul Solman:

    Dave Kaselauskas once taught chemistry, felt trapped in the classroom, switched to lobstering 52 years ago. But, as we found out, he's still a teacher to the core.

  • Dave Kaselauskas:

    This one goes over, still $4. This one now has a 25 percent tariff imposed by the Chinese government.

  • Paul Solman:

    Right.

  • Dave Kaselauskas:

    And so that is going to cost an extra dollar. Which one are you going to buy? They're identical. Both are Homarus americanus. Both are from the Gulf of Maine.

  • Paul Solman:

    And why can us lobsters get into China via Canada tariff-free? Because Canada is not in a trade war, and happens to have its own liberal trade rules.

  • Stephanie Nadeau:

    And the way they write their certificates is, it only has to come from the North Atlantic fishing region. It doesn't distinguish between country of origin.

  • Paul Solman:

    But, on the flip side, any lobster shipped by an American wholesaler from the U.S. to China, even one caught in Canadian waters, is stamped product of the USA, thereby triggering the tariff.

  • Stephanie Nadeau:

    There's no way out for a U.S. lobster dealer. And you have given every advantage to Canadian lobster dealers. It's insurmountable.

  • Paul Solman:

    So China's retaliatory tariffs benefit the Canadian industry, already growing as the Gulf of Maine warms, pushing lobsters north.

    But so what?

  • Annie Tselikis:

    In the lobster industry, everything is connected.

  • Paul Solman:

    Annie Tselikis runs the Maine Lobster Dealers' Association.

    You represent wholesalers, the middlemen. Historically, neither customers nor suppliers have liked the middlemen, right?

  • Annie Tselikis:

    Our fishermen go out fishing every day, they come back and they bring in their lobsters. They're not the ones that are marketing and promoting their lobsters. So, we really need this industry to work at its greatest potential.

    And for us, that also means having our valuable export markets accessible for this product that is so important to the state of Maine.

  • Stephanie Nadeau:

    In this particular product, you have to have a middleman, because someone has to be responsible for the life support system to get them to where they're going.

    You can't just take them out of the ocean and ship them. They will die. They have to be kept in this very cold room and packed under temperature control. We have developed packaging methods, how we keep our lobster tanks, how we handle our lobsters, over 15 years.

  • Paul Solman:

    And it's that unique skill that's now, at least for the moment, obsolete.

  • Stephanie Nadeau:

    Worthless.

  • Paul Solman:

    Worthless.

  • Stephanie Nadeau:

    Worthless, yes. That's tough to take.

  • Paul Solman:

    So what's an American lobster seller to do? The president recently tweeted an edict: "Our great American companies are hereby ordered to immediately start looking for an alternative to China."

    And, by the way, this is just what Maine Coast Lobster in York, one of the state's largest wholesalers, has been trying to do.

  • Sheila Adams:

    We did find growth in Taiwan, and Korea, and Malaysia. We're starting to see some growth in the Middle East.

  • Paul Solman:

    Vice president Sheila Adams.

  • Sheila Adams:

    We had two choices when the tariffs came out. We could retract, knowing that that business is going to go away, or we could say, let's go for it. So we had to look to other countries, as well as continuing to expand our domestic business.

  • Paul Solman:

    So how do you whet the appetite of American consumers for more lobster?

  • Sheila Adams:

    So, a promotion that you will see done is, lobsters are great for tailgating. Grilling a lobster or steaming up a lobster in a big parking lot before a game, you're going to have a lot of friends coming to see your tailgate party.

  • Paul Solman:

    And that's a double entendre, tailgate, lobster tail, no?

    (LAUGHTER)

  • Sheila Adams:

    I didn't think of that, but I'll use it.

    (LAUGHTER)

  • Paul Solman:

    But smaller players like Stephanie Nadeau cannot.

  • Stephanie Nadeau:

    There's no untapped market we're missing.

  • Paul Solman:

    So what are you doing?

  • Stephanie Nadeau:

    Selling less lobsters, making less money.

  • Paul Solman:

    As a result, she's laid off half of the 14 people in her wholesale operation.

  • Annie Tselikis:

    Our rural communities along the coast are dependent upon this fishery. That's what is potentially very scary for us, is thinking about this long term.

  • Paul Solman:

    And, by the way, says lobsterman Kaselauskas:

  • Dave Kaselauskas:

    My bait bill last year was $32,000. This year, it's going to exceed $50,000.

  • Paul Solman:

    Because the price of herring has gone up. So shellfishermen too are now starting to feel a substantial pinch.

  • Dave Kaselauskas:

    We're not achieving anywhere near our profit margin this year as we did last year and the year before.

  • Paul Solman:

    You mean your costs are going up.

  • Dave Kaselauskas:

    Correct.

  • Paul Solman:

    So the fact that the price is the same at the wharf is misleading, because you need to be charging more just to stay even?

  • Dave Kaselauskas:

    Absolutely. My dealer is trying to supplement our income by giving us a higher price, but he can't because of the tariffs.

  • Paul Solman:

    Right.

    And, hey, even 18-year lobster vet Dave LaLiberte is trying to escape the vagaries of the now volatile lobster trade.

  • Dave Laliberte:

    Slide that out. That's it.

    Our primary business is tourism.

  • Paul Solman:

    Really?

  • Dave Laliberte:

    Yes, taking the passengers out. I don't think we're necessarily making a lot more money than a commercial lobstermen. We're just diversifying a little bit.

  • Paul Solman:

    Just in case Canada takes the opportunity to further build up its lobster industry, and take the Chinese market away permanently from the United States.

    This is business and economics correspondent Paul Solman reporting from Maine.

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