- Australia’s $1.1 billion wine industry has been rocked by new tariffs launched by China that will effectively price the market out of demand.
- In some cases more than tripling the price of an Australian bottle, the latest move by China’s Ministry of Commerce threatens to close off a key export market until further notice.
- Reacting to the news, Treasury Wine Estates CEO Tim Ford said the tariffs would have “a significant impact on many across the industry, costing jobs and hurting regional communities and economies which are the lifeblood of the wine sector.”
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On Friday, China pulled the trigger on yet another economic threat, adding huge taxes onto $1.1 billion worth of Australian wine.
Justifying it via as yet unproven allegations of ‘wine dumping’ – producers claimed to be selling artificially cheap plonk – it’s the latest attack by Australia’s largest trading partner.
The Chinese Ministry of Commerce’s new tariffs multiply the price of some bottles as much as threefold, all but shutting out Australian winemakers from their largest export market.
It follows similar tariffs, or threats against a range of export products, suspected to be in retaliation for Australia’s support of an independent investigation into China’s early handling of the coronavirus.
Trade Minister Simon Birmingham publicly acknowledged on Saturday that such moves were due to “other factors” in a terse relationship between Canberra and Beijing.
The Australia China Business Community followed on Monday with a warning that Australia needs to find a “circuit-breaker” in negotiations.
“Australian business – not to mention the broader Australian community – cannot afford the thinly disguised hostility that currently surrounds the wine tariff dispute to become the new normal in Australia-China relations,” National President David Olsson said in a statement.
While asserting that “Australia cannot bend the knee in response to Beijing’s pressure”, Olsson stressed that a solution, any solution, needs to be found soon.
“Beijing is clearly aggrieved, but so too are Australian winemakers, barley growers, beef producers, and many more. Pain will also be felt in China from buyers, distributors and consumers who have long enjoyed and benefited from trade with Australia.”
Australian producers are hurting
Treasury Wine Estates (TWE), one of Australia’s largest exporters to China and owner of the Penfolds label, is a prime example. Its shares fell more than 6.5% on Monday after exiting a short trading halt, despite the tariffs having been largely anticipated.
Treasury bottles under two litres will be hit by taxes of 168.9% until the Ministry makes its ‘final determination’ from a full investigation, expected to be concluded next year. It could result in the tariffs being amended, remaining as is, or being eradicated altogether.
“TWE expects that while the provisional measure announced remains in place, demand for its portfolio in China will be extremely limited,” the company said in a statement to the ASX.
As a result, the company said it will immediately commence its response plan, to reduce the impact of the decision. Expecting for the new strategy’s fruits to be borne over a three-year period, Australian winemakers are clearly bracing for the worst.
But it’s unclear how it will replace China completely, a nation that represents nearly a third of its earnings, with other Asian, American and European markets.
Meanwhile, the impact will be felt along every step of the supply chain, from winemakers and local vineyards that sell their grapes to the broader Australian economy.
“There is no doubt this will have a significant impact on many across the industry, costing jobs and hurting regional communities and economies which are the lifeblood of the wine sector,” TWE CEO Tim Ford said.
“We are extremely disappointed to find our business, our partners’ businesses and the Australian wine industry in this position.”