Bob Baines, right, works to unload a haul of new lobsters on Spruce Head Island. (Photos by Brian P. D. Hannon)
Bob Baines, right, works to unload a haul of new lobsters on Spruce Head Island. (Photos by Brian P. D. Hannon)
Bob Baines does not believe new foreign tariffs will have an immediate impact on the Maine lobster industry.

“The state is catching mostly new-shell lobsters that don’t ship well to China or the EU yet,” he said, plucking a few twisting lobsters from his haul to display the small number mature enough for an overseas voyage.

That won’t last, Baines said, and harder shells will come with more difficult trade barriers.

Moving quickly around the deck of his lobster boat Thrasher, Baines unloaded flat crates of live catch onto a dock adjacent to the Spruce Head Fisherman’s Co-Op, where he serves as president of the South Thomaston nonprofit that brokers sales for more than 40 dues-paying members.

Tariffs will undoubtedly affect prices as fall approaches, Baines concluded, and the lobster dealers he has spoken to are not happy.

“The international market is very important to the Maine lobster industry, and any loss in market means a lower price to the lobstermen, which directly affects our profit,” he said.

The Chinese tariff on Canadian lobster currently stands at 7 percent, while U.S. dealers face a tariff of 40 percent for live lobster and 35 percent for processed lobster. The discrepancy in price will likely push Chinese importers away from American suppliers.

China announced June 15 it would add 25 percent to tariffs imposed on American products, which is a potential blow to the lobster industry’s $1.5 billion annual contribution to Maine’s economy. The tariff was a direct response to the decision by President Donald Trump to attack perceived economic and technological threats with a 25-percent tariff on up to $50 billion in imported Chinese products, which went into effect July 6.

China also filed a complaint with the World Trade Organization in response to the Trump administration’s July 11 announcement of an additional 10-percent tariff on $200 billion in Chinese goods.

A member of the Lobster Advisory Council for the Maine Department of Marine Resources, Baines said likely no more than 10 Maine dealers have direct deals with China. The costs involve many months of building personal relationships, including Asian trips paid out of operating expenses.

“They’ve invested a lot of time and money developing these markets,” Baines said, adding that the growing Chinese middle class has created an opportunity there. Yet those investments and relationships are tenuous at best, Baines said, noting there is huge competition to place fare on Chinese plates, including lobsters from closer producers such as New Zealand and other types of seafood. “Maine lobster is new to China in the last four or five years.”

Even for harvesters — those who search Maine’s coastal waters for lobster — there are repercussions from tariffs regardless of whether they have contracts abroad. Harvesters are being hit with a double-whammy of tariffs; in addition to price hikes on sales from the U.S. to China and the European Union, steel tariffs could have a secondary impact on the industry by raising the cost of steel wire used to make traps. Mark Brooks of Thomaston’s family-owned Brooks Trap Mill said they have yet to experience fallout from steel tariffs. Riverdale Mills Corp. in Northbridge, Massachusetts, supplies their steel wire but has not yet increased costs. “We’re keeping our fingers crossed,” Brooks said. A representative of the Friendship Trap Company also said there has yet to be a change in their prices.

While retail lobster prices in Maine are holding steady between $7 and $12 per pound, Baines said the full effect of tariffs will not be known until the fall.

Dr. Robert Bayer concurs. The executive director of the Lobster Institute at the University of Maine in Orono, Bayer said the biggest potential impact of tariffs on Maine dealers is in the market for live lobsters shipped abroad and the results are unlikely to be known until dealers tally their sales after the summer season.

“We’re at a real competitive disadvantage,” from live lobster tariffs, Bayer said, noting that more than 60 percent of the Maine lobster catch is processed, turning live lobster into lobster meat products, and most of that is done in Canada.

“So much of our lobster is processed,” Bayer said, explaining that once those lobsters are sold to Canada and processed there, they become a product of Canada, not the United States.

Bayer added that Canada is the largest purchaser of U.S. summer lobsters, while America becomes the largest consumer of Canadian lobster in the winter, when the season has slowed in Maine and other states but is ramping up in areas such as southwest Nova Scotia.

Maine exported $2.9 billion in goods overall in 2016, a nine-percent increase since 2006, according to the Office of the United States Trade Representative (USTR), the federal agency that oversees foreign commerce, which said exports supported 18,000 Maine jobs in 2015.

Figures provided by the office of Gov. Paul LePage count approximately 4,850 lobstermen working in Maine, plus another 1,150 student license holders. The state saw $433.7 million from 110 million pounds of lobster hauled in 2017, with $336 million from export sales.

“The impact of counter-tariffs imposed by China on July 6 in Maine are narrow but deep, since 99 percent of the effect falls on our lobster industry, ” said Wade Merritt, president of the Maine International Trade Center, which holds overseas trade shows. “Beyond the lobster dealers that are exporting to China, there are the ripple effects in the communities where the industry supports the local economy.”

Merritt explained that in 2017 approximately 17 percent of Maine lobster exports were to China. He said MITC is working with members of Congress “to resolve the market access issue for China,” while also helping the state’s exporters develop other markets, including Vietnam, Singapore and the Middle East.

“Communities will be devastated”

State Rep. Walter Kumiega serves as the House chair of the Joint Standing Committee on Marine Resources. He represents District 134, including Stonington, Southwest Harbor, North Haven, Tremont and Vinalhaven, Frenchboro, Swan’s Island, Deer Isle, Isle au Haut, the Cranberry Isles, and Marshall Island Township. His district alone lands more lobster than all of Massachusetts combined, he said, and with so many of his constituents connected to the industry, increased tariffs will undoubtedly impact their livelihoods.

“I can’t see how it’s going to be a good thing,” Kumiega said. “It’s a huge part of the coastal economy.”

Sending lobsters to Asia is difficult and “only worthwhile to do it if they can ship more to China than they can domestically,” while finding new sales opportunities is a constant challenge. “They’ve got to find other markets,” Kumiega said. “It’s not a huge market. If Canada put a tariff on lobster it would be devastating.”

Genevieve McDonald, a lobster boat captain from Stonington and member of the Lobster Advisory Council, said there are potential repercussions across the industry whenever a market for Maine lobster is threatened, but “we have weathered ebbs and flows before and will continue to do so. Maine fishermen are resilient, and we are fortunate to land a premium product with worldwide demand.”

“As a fisherman myself, it is difficult for me to speculate how this may impact ex-vessel cost, as fishermen have an extremely limited role in determining what we are paid for our catch,” said McDonald, who is running to fill the House seat Kumiega will relinquish due to term limits. “It is peak lobster season right now, which coincides with peak tourism season. There is hope we may be able to expand our domestic markets through the work being done by the Maine Lobster Marketing Collaborative.”

Kumiega admits there is little state lawmakers can do beyond asking for federal help. He believes, however, there needs to be a course correction from the “wrong direction” in which U.S. policy is currently headed.

“Trump doesn’t appear to be someone who’s going to change his mind on this,” Kumiega said. “I think it’s going to take Congressional action to get us out of this mess.”

Kumiega was among a bipartisan contingent of 112 state legislators to sign a letter asking Maine’s Congressional Delegation — U.S. Reps. Chellie Pingree and Bruce Poliquin and U.S. Senators Susan Collins and Angus King — to “advocate in the strongest possible terms to address the economic damage that will inevitably occur through the targeting of Maine lobster in a trade war with China.”

The state officials — including Sens. David Miramant and Dana Dow from Knox and Lincoln counties and representatives from Lincoln, Rockland, Rockport, South Thomaston, and Waldoboro — called China one of the “largest and most important markets for Maine lobster meat.” Retaliation in response to U.S. sanctions risks the livelihood of thousands of lobster men and women and those in related industries, the letter stated, adding a blunt warning: “Whole coastal communities will be devastated.”

Maine’s members of Congress met July 1 in Portland with representatives of the USTR and the Maine Lobster Dealers’ Association to discuss trade policies, which Collins said they hoped would “foster an ongoing dialogue on ways to promote and expand access to overseas markets.”

On July 2 in Stonington, King met employees of the Greenhead Lobster Company and representatives of the Maine Center for Coastal Fisheries.

“Lobsters are a billion-dollar business in Maine, and a major part of our state’s identity,” King said, noting that the industry faces “serious challenges ranging from the effect of the administration’s misguided trade wars to the potential impacts of climate change.”

In a July 18 email to supporters, Pingree decried Trump administration trade actions that “have hit Maine hard, especially our valuable lobster industry.”

“Its lack of a cohesive strategy has allowed Canadian lobster to gain a competitive advantage in the European market and also led China to charge an additional 25% retaliatory tariff on U.S. lobster,” Pingree said, adding that she urged the USTR to take “corrective action to help Mainers.”

Peter Steele, communications director for LePage, said, “The governor has been in contact with the Trump administration about the deleterious effects of tariffs on the Maine businesses, including the lobster and steel industries.”

Maine’s political class and lobster professionals are not alone in voicing concerns over the trade war.

The U.S. Chamber of Commerce recently released an analysis showing foreign trade supports 180,500 Maine jobs, with the value of state exports threatened by new tariffs reaching as high as $129.5 million. That includes $67.4 million in exports to Canada, $58.8 million to China, $2.3 million to the EU, and nearly $971,000 to Mexico, according to the Chamber.

“Tariffs imposed by the United States are nothing more than a tax increase on American consumers and business,” the Chamber stated. “Retaliatory tariffs imposed by other countries on U.S. exports will make American-made goods more expensive,” resulting in lost sales and jobs.

As he finished gassing up his lobster boat at the dock on Spruce Head Island, Baines pointed out that operating costs such as fuel and fishing supplies remain the same regardless of the sale price of the haul.

“Bottom line is, if we lose market share, the price will go down,” Baines said, preparing for another trip out to the open water. “It cuts right into our profit.”