Now, the survival of his farm, Hsu’s Ginseng Enterprises Inc., rests largely on a man-made threat: the trade fight between China and the U.S.
Mr. Hsu’s thousand-acre farm in Wausau—a city in the heart of central Wisconsin also known for quarrying red granite—is among the biggest of some 200 U.S. growers clustered in an area 68 times the size of Manhattan, whose ginseng is the most expensive in the world. The root has become a mainstay of this flat, fertile region over the past century—and an emblem of how globalization became embedded throughout the U.S. economy.
Export goods from small U.S. businesses to China have nearly tripled in the past 15 years, in line with the broader trend in bilateral trade. Ginseng is a tiny sliver of the trade between the world’s two largest economies, making up about 0.02% of total U.S. exports to China of about $130.4 billion last year.
But effective April 2, the U.S.-grown root was slapped with a 15% tariff that Beijing imposed on U.S. agricultural commodities, part of the tit-for-tat exchange of escalating tariffs that together potentially cover at least $200 billion in goods. That levy threatens to price American ginseng out of Chinese markets altogether.
The U.S. contributes a small volume to the global ginseng trade, said Will Hsu, Paul Hsu’s son, who returned to help run the family farm after a freak spring snowstorm devastated the crop in 2010, just as his father was struggling with prostate cancer. “But because we are well-known, we kind of have a target on our back,” he said.
That the root’s most valuable output comes from one of its smallest producing nations is a phenomenon of globalization. In American ginseng, China found a target virtually tailor-made for punitive tariffs.
China’s tariffs target a wide swath of small businesses found among President Donald Trump’s support base in the U.S. Farm Belt, including growers of soybeans, sorghum and live hogs as well as potentially bigger exporters such as aircraft manufacturers.
Consumed at home in only very small quantities, ginseng from Wisconsin contributes about 10% of the world’s supply, more than 85% of which is exported to China. The Badger State is the home state of Republican Speaker of the House Paul Ryan, a longtime critic of China’s trade practices who has nevertheless opposed Mr. Trump’s tariffs, warning of their “unintended consequences.”
Chinese distributors have warned that they may shift their purchasing to Canadian ginseng, said Jackie Fett, executive director of the Ginseng Board of Wisconsin.
American ginseng, like Japanese wasabi, is a notoriously temperamental root, thriving in just a handful of places around the world—central Canada, northeastern China and the slice of Midwestern plains centered on Wisconsin’s Marathon County.
That is where Paul Hsu, a Taiwanese immigrant, settled his young family in 1974. The 10th of 14 children, the elder Mr. Hsu said he was intrigued when 3 pounds of the root he sent home in 1972 improved his ailing mother’s health. The root, which studies say has healing properties including boosting the immune system, can be consumed raw in slices, simmered in soups or tea, or ground into powder and placed in capsules.
Marathon County’s soil—rich in loam after the retreat of glaciers from the Great Lakes—and cool climate hone the root’s flavor and appearance, enabling farmers to charge as much as a 50% premium over Canadian ginseng and twice China’s prices. A single American ginseng crop takes at least five years to bring to harvest.
Without Chinese demand, farmers say such a fussy root wouldn’t likely have survived as an agricultural commodity. Ginseng’s earliest buyers about a century ago were Hong Kong traders in New York area ports.
American ginseng’s brand recognition in China “is like the difference in recognition between affordable smartphones and Apple,” said Yang Hongyi, a ginseng retailer based in Jilin, China’s largest ginseng-producing province.
To capitalize on their advantage, the central Wisconsin community of farmers evolved to meet ginseng’s needs. Farmers used the state’s abundant land to develop a system of swapping, selling or leasing arable areas to ensure that ginseng is never grown on the same plot twice, as the root thrives best in land that has never before been planted with ginseng.
While Chinese was hardly spoken in the region 50 years ago, the Ginseng Board of Wisconsin’s website now displays Chinese characters and receptionists at some growers speak Mandarin when answering phone calls.
Rising Chinese demand has spurred import volumes of ginseng from the U.S. to double over the decade ended in 2017, according to China customs data. American ginseng now retails for around $120 per pound—1,700 times as expensive as U.S. corn.
The retreat from globalization threatens to unravel the benefits of such specialization. As short-term ginseng prices spiral upward, U.S. farmers fear Chinese consumers will switch to Chinese medicinal products such as cordyceps, a type of fungi, or bird’s nest to derive similar health benefits. Over the longer term, they fear the tariffs could hurt communities and destroy livelihoods.
“If this is long-lasting, it could be more devastating than the snowstorm” of 2010, said Jeff Lewis, general manager of the Ginseng & Herb Cooperative, in Marathon City. “It could cut back on our production and sales, and it’s going to force some producers out of the industry.”
The ginseng trade sustains an estimated 1,000-plus U.S. jobs. Meanwhile, growers in Jilin are accelerating the planting of American ginseng plants, according to the Chinese Institute of Jilin Ginseng. The years needed to bring a crop to harvest make the tariffs’ potential benefit to Chinese farmers uncertain.
Wisconsin’s farmers are bracing for a decline in demand for this fall’s harvest, as Asian buyers pressure for discounts and prices of Canada-produced ginseng rise as supply tightens.
“Nobody wins trade wars,” said Paul Hsu, who worries the tariffs will hurt employment at his farm. - WSJ
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