Additional reporting by Jason Huffman

Chinese tariffs of 25% have hit imports of US seafood to the tune of $340 million since they came into effect, according to latest Chinese customs data.

Chinese imports of US seafood fell from $1.3 billion in the 12 months prior to tariffs (July 1, 2017-June 30, 2018), to $969m in the twelve months after (July 1, 2018-June 30, 2019), Chinese import data shows, underlining the heavy impact of weaker demand for US seafood subject to tariffs, while poor catch of US wild-caught seafood was also to blame.

The drop in trade underscores the high stakes involved in the latest round of trade negotiations between US and China underway in Shanghai, including for the US seafood industry.

The biggest drop was of Chinese imports of US live, fresh American lobster, which fell from $176m to just $25m, a decline of 86%, data shows. Read also In charts: US-China trade war hits seafood, part one

On Monday, Chinese state-owned news organization Xinhua spotlighted one struggling lobster wholesaler in Gloucester, Massachusetts, Vince Mortillaro, who reported exporting 500,000 pounds less lobster during the first six months of the year.

The drop represents about 10% of Mortillaro’s 5 million lbs in annual export sales and will cost him roughly $6m, according to Xinhua. He’s cut back on staff to get by.

"My employees used to work 60 plus hours a week and they now only work 35-40 hours,” he reportedly told the news agency. “They couldn't pay their bills. We lost employees because of it. They had to leave for other jobs. We had to lay some people off too because there just wasn't enough hours."

However, it is believed large quantities of US lobster are transported to Canada then flown to China with Canadian labels attached; China's imports of lobster from Canada have surged (see chart one above).

China's imports of US crabs, sold mostly live or fresh at higher market values to high-end restaurants in Beijing and Shanghai, also contracted significantly.

In the 12 months prior to tariffs, China imported $122m worth of live and fresh US crabs; in the 12 months after, imports dropped to $60m, a decline of 49%. Meanwhile, China imported live and fresh US molluscs worth $65m, down 27% y-o-y.

In volume terms, China's imports of live and fresh lobster, crabs and molluscs were down 84%, 40% and 27% respectively, to 1,420 metric tons, 3,787t and 1,930t.

Import of US seafood exempt from tariffs also down

China exempts certain imports of US seafood from tariffs if they are processed at Chinese factories and re-exported. Whole frozen Pacific salmon harvested in Alaska is one such product.

In the 12 months since the beginning of July, China imported $136m worth of US Pacific salmon, representing a drop of 56% in value, while import volumes declined 62% to 38,926t.

The drop in Chinese imports of Pacific salmon -- species such as pinks and chum that are processed at Chinese factories into fillets and re-exported globally -- was largely down to a lower return of pink salmon in Alaska.

Chinese imports of whole frozen cod -- also processed into fillets -- decreased to 24,261t worth $91m, a drop of 37% in volume and value, also largely due to poor catch.

As a result of the drop in US exports to China, US slipped back to fourth behind Russia, Ecuador and Canada as China's largest seafood suppliers, down from second previously (see tables and chart two).

Trump tweets cast dark cloud over latest negotiations

One ray of hope shined on the US seafood industry on Tuesday when two top officials in the US president Donald Trump administration -- Steven Mnuchin, the secretary of Treasury, and Robert Lighthizer, the US trade representative -- arrived in Shanghai as part of a contingent to talk with the Chinese.

The restarted talks, however, are off to a rough start following a tweet storm by Trump early in the week, claiming that China is not buying more US agricultural products as it promised to do. The country may be slow-walking the talks as it awaits the results of the 2020 election, he said.

“China is doing very badly, worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so. That is the problem with China, they just don’t come through,” Trump wrote.

But Xinhua, China’s state-run media agency, reported on Sunday that millions of tons of US soybeans have been purchased since July 19. It added that companies are looking for soybeans, cotton, pork and sorghum. And US data shows soybean exports increased by $727m in May, up 7% compared to the first five months of 2018.

China implemented tariffs on imports of US seafood on July 6, 2018. The tariffs were implemented in response to the Trump administration's implementation of tariffs on $250bn worth of Chinese imports.

China's top imports of US seafood, 07/18-06/19

HS code Product Value ($m) Change Volume (metric tons) Change 03033900 Whole frozen flat fish 196 -3% 104,113 -6% 03031200 Whole frozen Pacific salmon 136 -56% 38,926 -62% 03036300 Whole frozen cod 91 -37% 24,261 -37% 03063290 Live, fresh or chilled lobsters 25 -86% 1,420 -84% 03063399 Live, fresh or chilled crabs 60 -49% 3,787 -40% 03074310 Frozen cuttle fish and squid 60 -40% 22,175 -42% 03038990 Frozen fish, nes 89 -3% 34,506 6% 03079190 Live, fresh or chilled molluscs 65 -27% 1,930 -27% 03036700 Frozen Alaskan pollock 66 12% 44,961 -8% 03063190 Live, fresh, or chilled rock lobster and other sea crawfish 47 2% 1,928 34% Source: ITC, data compiled by Undercurrent News

China's top-10 suppliers of seafood, 07/18-06/19