Wine Spectator: Will China’s Threatened Tariffs Hurt American Wine?March 30, 2018
Could American wine end up collateral damage in a trade war between two of the world’s biggest wine-consuming nations? On March 23, the Chinese Ministry of Commerce announced it was planning to impose a 15% tariff on U.S. wine, among other products, in retaliation for U.S. President Donald Trump’s plan to impose tariffs on $60 billion worth of Chinese goods coming into the U.S.
While it’s unclear if the Chinese government will actually follow through on its threat, wine industry leaders are asking how this may affect their bottom line. “We’re very concerned that these tariffs will impose new barriers to the long-term development of the important Chinese market and will create a competitive disadvantage for American wine relative to other regions that enjoy more favorable tax treatment,” said Ryan Pennington, director of communications at Ste. Michelle Wine Estates.
Earlier this month, President Trump announced a 15% tariff on Chinese steel and aluminum. His government is also preparing a list of Chinese products that could be targeted with additional tariffs after a U.S. inquiry found China guilty of intellectual property theft and unfair trade. That’s prompted China to retaliate with tariff threats of their own, including on U.S. wine, fruit, pork, and more.
American wine is just beginning to build a presence in the People’s Republic. The U.S. exported close to $80 million worth of wine to China last year, the equivalent of over 14 million liters, and the country is the fifth-largest foreign market for U.S. wine, according to the Wine Institute, a trade group. Christoper Beros, the Institute’s Asia director, estimates that approximately 200 California wineries are exporting to China, most of them large- to medium-size.
But while the volume of U.S. wine imports may seem high, it’s just 2% of the Chinese wine market, dwarfed by imports from other countries such as France, Australia, and Chile. French wines have long enjoyed an elite image with Chinese consumers. And Australia and Chile have negotiated free-trade agreements with China, which have put them at a significant advantage.
Current Chinese customs duties for U.S. wines are 14%—should the proposed tariffs go through, that would rise to 29%. Wines from Australia and Chile are charged customs duties of 0%. According to Beros, these countries “have relied heavily on exports for many years for their entire industries [and] have been aggressively marketing in China.” In 2017, Australian wine imports into China jumped 53%, up to $741 million. Wine Spectator has a full report on the potential ramifications of China’s threatened tariffs on U.S. wine.—Emma BalterSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.