The Washington PostDemocracy Dies in Darkness

This rural Wisconsin county is famous in China. A trade war could take it all away.

Employees separate out the best of the ginseng at Hsu Ginseng Farm in Wausau, Wis., on April 9. (Lauren Justice/For The Washington Post)
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MARATHON COUNTY, Wis. — There are ginseng farms in this remote corner of Wisconsin where phones are answered in Mandarin. Others have opened storefronts or retrofitted spare rooms to welcome busloads of Chinese tourists and businesspeople.

This rural area built an important local industry as a purveyor of a premium product for China’s rising middle class, where its ginseng is sold in boxes bearing the American flag and the ­line, “Something Special from Wisconsin.”

Now trade tensions between the United States and China threaten a niche market that employs hundreds of workers and supports dozens of family farms in a rural community where other options are limited.

The uncertainty surrounding Wisconsin’s ginseng industry exemplifies the unforeseen consequences of President Trump’s trade policies in a complex and globalized economy. It also could foreshadow harms to a range of specialized products across rural America, from lobsters in coastal Maine to macadamia nuts in Hawaii, that cater to China’s expanding middle class.

In central Wisconsin, U.S. brokers are monitoring the Chinese market for a decline in sales after China imposed a 15 percent tariff on ginseng, part of its response to steel tariffs levied by Trump.

Some say importers already have demanded price concessions at a time when many farms are barely clearing production costs.

Ginseng exports are a $30 million industry in Marathon County, and local economists estimate that each new job in ginseng creates as many as four additional jobs.

“Americans are the losers in all this,” said Mike Klemp-North, the director of operations at Hsu’s Ginseng Enterprises, the county’s second-largest ginseng farm. “This is one product we had, of all the products we trade, that the Chinese really wanted from us.”

At Hsu’s sprawling operation, more than 100 full-time workers bustled around on a recent offseason afternoon — tuning up machinery, packing tea bags into boxes and “cruising,” or sorting, barrels of roots.

Chinese-language catalogues and calendars flank the entrance to the farm’s retail office. A conference room is decorated with laminated clippings from Chinese newspapers, as well as framed photos of company founder Paul Hsu meeting executives from Alibaba, a Chinese ­e-commerce giant, and Foxconn, the assembler of Apple’s iPhone that last year announced plans for a $10 billion plant in Wisconsin.

Foxconn recently promised to help local growers market ginseng in Asia, a collaboration that developed after chief executive Terry Gou began buying it.

In the past four years, Hsu’s has added four automated field machines worth about $100,000 apiece and a $1.9 million processing facility, allowing the farm to ship more and better product, farm manager Nick Sandquist said.

At 46 years old, Hsu’s Ginseng is among Marathon County’s youngest ginseng farms. Many of the region’s 180 small growers have been built up over four or five generations, largely on the strength of trade with China.

Historically, middle- and upper-class Chinese consumers have given the pricey root as gifts, or used it to brew teas and broths believed to confer health benefits. As the Chinese middle class has grown, however, so has the demand for Wisconsin ginseng — from bitter candies to K-cups.

According to the Ginseng and Herb Co-Op, a local nonprofit cooperative that represents growers, ginseng production has risen at a rate of about 10 percent for each of the past five years.

But since ginseng became entangled in a budding U.S.-China trade war, that trajectory has grown complicated.

“I’m worried. I’m worried for my son,” said Sandquist’s father, Ron Sandquist, who served as farm manager for 30 years before retiring 10 years ago. “If it all goes haywire, they have a lot of money invested.”

Farmers here say they fear that crisis may be drawing close. On April 1, China placed a 15 percent tariff on American ginseng, along with tariffs on 127 other U.S. products.

The dispute began in March, when Trump announced tariffs on foreign steel and aluminum, later exempting U.S. allies but not China. In subsequent rounds of tit-for-tat retaliations, Trump proposed additional levies on Chinese electronics and aerospace and machinery products, while China targeted ginseng, soybeans, corn, pork, fruit and nuts.

Agricultural groups have warned that the tariffs could significantly damage the farm economy. But the injury may prove especially grievous in a place like Marathon County, where an entire industry depends in large part on trade with China.

After the check is gone

In 2017, direct sales to China accounted for $14.1 million, or nearly half, of Wisconsin’s ginseng trade, according to the state’s department of agriculture. Hong Kong, which acts as a gateway to the Chinese market, accounted for an additional 41 percent, with smaller sales to Canada, Singapore and Taiwan making up the remainder.

That money doesn’t just end up in farmers’ pockets: A network of farmworkers, brokers and bilingual salespeople has grown around the industry. According to one analysis by economists at the University of Wisconsin at Whitewater, ginseng production generates $43 million in local economic activity annually.

“If you lose even a little bit of demand, it starts falling apart,” said Russell Kashian, the lead author of the U-Wis. analysis.

“It’s not a huge crop, but it is locally significant,” he added. “It supports a couple hundred jobs . . . in a county that isn’t very wealthy to begin with.”

Growers fear the tariff is likely to reduce demand in China, leading dried roots to pile up stateside and cutting wholesale prices.

Wisconsin ginseng commands a higher price than Canadian, Chinese or Korean ginseng, all of which are widely available in China, said Shirley Wang, a Shanghai native who works for local grower and distributor Marathon Ginseng.

If the price increases further, Wang predicts, some middle-class consumers — or the importers who supply them — will no longer pay.

That could cause an oversupply in the Wisconsin market. At the same time, Chinese importers may push farmers to absorb the cost of the tariff. Jeff Lewis, president of the Ginseng and Herb Co-Op, said several Chinese buyers already have asked him to lower his prices.

He resisted, aware that the last time prices bottomed out, in the 1990s, the number of ginseng farms in central Wisconsin nose-dived from more than 1,400 to a couple hundred.

“A lot of producers filed for bankruptcy. Others just quit,” Lewis said. “If the price drops to $20 per pound today, half of the current producers will exit.”

For now, a pound of Wisconsin ginseng still runs between $35 and $40 — about 24 percent above the cost of production. But with little idea how Chinese importers will react to the tariff, and no clarity on how long the trade conflict will last, some growers and brokers say they are starting to panic.

At Hsu’s, farm manager Nick Sandquist has begun looking for places to cut costs. At Glenn’s Ginseng Sales in Marathon City, broker Glenn Mroczenski jokes that he is fielding so many calls from alarmed farmers that he might append “And Counseling Services” to the sign outside his office.

Across Marathon City’s postage stamp of a downtown, the offices of KUB Ginseng lie quiet while broker Simon Ko makes a last-minute trip overseas to reassure his Chinese clients. His biggest fear is that his customers in China will turn to suppliers in Canada and stick with them even after this trade dispute is resolved.

That kind of shutout could affect other specialty products, said Chad Bown, a senior fellow at the Peterson Institute for International Economics. China placed tariffs on U.S. chicken parts in 2009 as part of a trade dispute with the Obama administration. That market never recovered: China turned to Brazil instead.

“We are also worried we lost the market,” Ko said. “Right now, I don’t think farmers even know how serious this problem is.”

Back home in central Wisconsin, Sandquist says he appreciates the threat. He uses an expletive to describe Trump’s trade policy, which he says will imperil small local growers and may force him to cut jobs or acreage this season.

“I think some fights are worth fighting, and some fights are not worth fighting,” he said.

“And this?” He gestured toward the empty fields. “It seems like it’s all a game to them.”