China’s Trade War on Australian Wine Is Over—For Now

China’s government has officially abolished punitively high tariffs on imported Australian wine. The Beijing government announced the removal of the duties—which ranged as high as 218 percent—March 29. Australia’s wine industry, which was China’s biggest source of imported wine before the tariffs were enacted in 2020, hopes the reversal will offer new opportunities at a time when grapegrowers are confronting an oversupply and pulling up vines. However, industry analysts caution that the Chinese market is not the same as it was four years ago.

The Chinese government said it was ending the tariffs after an evaluation of prevailing market conditions for China’s wine sector. But a bigger factor was the easing of tensions between Beijing and Canberra. In a joint statement with Australia’s foreign minister and trade minister, Australian prime minister Anthony Albanese said, “We welcome this outcome, which comes at a critical time for the Australian wine industry. The reentry of Australian bottled wine into the Chinese market will benefit both Australian producers and Chinese consumers”.

Wine a Casualty of International Politics

The devastatingly high tariffs were enacted following a political spat between the two governments in 2020 when China took issue with Australian officials calling for an international inquiry into COVID-19’s origins. This compounded tensions from 2018, when Australia banned the Chinese firm Huawei from deploying a 5G network, citing a national security risk given the tech giant’s close ties to the Chinese government.

The tariffs were punitive—China alleged that Australia had been dumping cheap wine into the Chinese market to undercut local wines and that the Australian government was subsidizing wine exports. (There was no evidence for either claim.) Prior to the tariffs, China was Australia’s largest wine export market, valued at around $790 million (AUS$1.2 billion). That trade quickly withered.

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Hope grew after Albanese visited China in late 2023, the first state visit from an Australian Prime Minister since 2016. Upon the announcement of the visit, China agreed to review the tariffs, culminating in a decision to lift them March 29.

Treasury Wine Estates had the most lucrative import business in China before the tariffs due to the enormous success of the Penfolds brand in markets there. “The removal of tariffs on Australian wine exports to China is terrific news and is cause for celebration across the Australian wine industry and with our partners and consumers in China,” said CEO Tim Ford in a statement.

China’s Wine Market Has Changed

While many are excited to see the tariffs go, Ford is well aware of the challenges ahead. “We’re excited to bring more of our Australian luxury and premium wines back to the China market, but we’re mindful it will take time to sustainably regrow both supply and demand,” he said.

These sentiments of cautious optimism are indicative of the wider response from Australian producers. The Chinese wine market has changed a great deal since the pandemic, primarily because the economy has continued to struggle. President Xi Jinping’s government has also cracked down on excess government spending by officials and business leaders, including extravagant banquets with bottles of luxury wine. While Chinese economic statistics are not transparent, some analysts believe the country is now consuming just a quarter of the volume of wine it drank in 2017, its peak as a wine market.

“We are very hopeful that the love for Australian wine will return to the Chinese…

Source : https://www.winespectator.com/articles/china-ends-trade-war-on-australian-wine