Posted: Apr 06, 2018
For at least one California vineyard, the tariff turf war escalating between the U.S. and China has already put the shipment of 5,000 cases of wine on hold.
“Our importers in China are reluctant at the moment to proceed with shipping wines that have been already ordered,’’ says Michael Parr, vice president of international sales for vintner Wente Family Estates.
Winemakers in the U.S. like the Wentes are worried that they will lose the race to win the fast-growing Chinese market if the two nations continue to pile on more tariffs.
China's expanding middle class has made it the fifth biggest market for exported U.S. wines, according to the California Association of Winegrape Growers, a trade organization.
But China's announcement Monday that it would impose a new 15% tax on U.S. wine imports in retaliation for the Trump administration’s plans to tack tariffs on imported aluminum and steel could cause U.S. wineries to lose ground to rivals in countries like Australia and Chile, which face fewer barriers.
"We like to think California is unique, and it is, but it hurts us . . . when these tariffs are imposed,'' says John Aguirre, president of the Sacramento-based wine grape grower's association. "There are a lot of people producing wine grapes, and making wine and exporting, so it's not like we can just step back in and reclaim our lost market share.''
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The new tax, which comes on top of a 14% tariff China already imposes on U.S. wines, was part of China's decision this week to raise levies on $3 billion worth of American products, including pork and apples. The tariffs are in response to the U.S.'s proposal to make imported steel and aluminum more costly.
The trade battle got even more intense Tuesday after the U.S. issued a list of 1,300 categories of Chinese goods that it intends to tax more heavily because of what it says is China's theft of cyber and intellectual property. China, in turn, threatened to impose tariffs on 106 U.S. goods ranging from airplanes to soybeans. Each country would be targeting $50 billion worth of the other's products.
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The levies come at a time when sales of U.S. wines have skyrocketed in China as the middle class spends more of its growing disposable income on imported luxuries.
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California, which produces 97% of the wines exported by the U.S., has seen sales to China rise 450% over the last decade, according to the Wine Institute, which represents 1,000 California wineries and associated businesses. Combined exports to China and Hong Kong rose 10% last year to $197 million.
But buying bottles of some American wines may get more difficult as well as more expensive.
By Charisse Jones
April 5, 2018
Parr, of Wente Family Estates, says that the company's shipments to China are up 80% so far this year. But now, their Chinese importers "want to wait and see how the current situation plays out."
He said the 5,000 cases of Wente wine that were supposed to go to China are now sitting in a warehouse.
“It is very unfortunate that the (U.S.) wine industry has become collateral damage over a political situation,’’ he said in an email.
The Chinese importers' pensiveness is not only in regard to whether the new tariffs will actually come to pass, but "also in terms of Chinese consumers' overall perception (of) U.S. products. We could anticipate a backlash on several U.S. products as Chinese consumers align themselves with government policy," he said.
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