Are Trump Tariffs Hurting American Wine In China?

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Numerous reports from the USA claim that Trump's tariffs are doing damage to America's wine prospects in China. By, who is based in China, disagrees. He explains why.

Coverage of China’s extra tariffs on US wine during the current trade war reveals a gap between reality and the claims being made by both media and trade bodies. Here are examples of three such claims.

Claim one
The tariffs will hurt many producers, even those far from the coastal powers of California, Oregon and Washington State.

“US-China trade war squeezes Ohio wine industry,” is one such claim. Yet it’s hard to imagine the damage, as I haven't seen a single bottle of Ohio wine in China.

It turns out, Ohio isn't being squeezed at all. “The locals are not feeling the crunch yet,” according to Donniella Winchell, executive director of Ohio Wine Producers Association.

But Winchelll also states that the crunch is only a matter of time. The argument is that falling exports to China will lead to a glut of US wines at home, especially from California, and crowd Ohio brands.

But even before the trade war, the US sent a mere 0.4%, or one out of every 250 bottles, to mainland China. That’s not enough to wet the US market’s floor let alone flood it. Breathe easier, Ohio producers.

Claim two
A second claim is found in this story about Washington State wine: “China is the fastest growing export market for US wine.” This claim comes with no attribution, time frame or indication as to whether it refers to mainland China (where there are extra tariffs) or Hong Kong (no tariff), or both.

China Customs statistics for bottled wine show the market more than doubled from 241m litres in 2011 to 552m in 2017, the year before the first tariff. Yet in that period, US imports dropped from 12.3m to 9.6m litres. Going even further back, in 2009, the US represented 7% of bottled wine importers to China, while in 2017, that figure was just 2%.

Claims like “fastest growing” hint at a success that the numbers do not support. It’s like pointing to a wine as the highest-scoring without noting that it only received 77 points.

The article also reveals that China’s wine market is a modest one for Washington State, with only 16 wineries exporting there.

The third claim
Finally, there is LA Times story, “The latest casualty of Trump's trade war with China? California.”

The key interviewee is Hank Wetzel of Alexander Valley Vineyards in Sonoma. Wetzel visited China two years ago, started to export there last year, and is happy with his partners, though not so much with the tariffs. “We could soon be out of business there,” he is quoted as saying.

But as in the other cases, a situation that sounds serious may not be, according to a different article.

“[Wetzel] said the US-China trade war won’t financially strain the California winery,” it states. “Thankfully it’s a relatively small part of our market,” Wetzel, who is also chairman of California-based trade and lobby group Wine Institute, was quoted as saying.

This article also includes the claim that US producers’ relationships with importers have been wiped out due to the tariffs.

“We’ve worked on building those relationships for two decades,” Honore Comfort, the Wine Institute’s VP for international affairs, is quoted as saying. “Now all of that time is basically a loss.” (Comfort also repeats the “fastest-growing export market” claim.)

There is no doubt the tariffs have hit a small number of China-focused importers and producers hard, with some already giving up. But the claim that all is lost seems a bit much given the modest US performance in China despite 20 years of relationship-building.

As noted, even before these newest tariffs, US wine struggled in China. US wine producer have less cachet than French ones in a market heavily skewed to status buying. They also lack the free trade deals of competitors like Australia and Chile, and, with the world’s largest market at home, are under far less pressure to export than countries such as Italy and Spain.

But unless things drastically worsen, US wine will continue to find a niche in China, if a smaller one. US wine fans tend to be knowledgeable and recognize that good labels are pricey, which helps insulate the sales of iconic brands. And some importers and producers will simply wait until the trade situation improves, then leap back into the market.

In fact, the efforts of producers and importers to familiarize consumers with US wines over the years will help sustain this, as will the efforts of the Wine Institute itself. Many people know about US wine due to the organization’s tours to dozens of cities beyond usual stops like Shanghai, Shenzhen and Beijing, which exposed the trade and consumers to Sonoma Chardonnay, Napa Valley Cabernet, Lodi Symphony and more.

In fact, given the light presence of US wines thus far, the most tangible damage for many will not be lost sales in China but the cost of Chinese bottles. As one producer in the Washington State article said, his winery uses over 100,000 bottles from China per year and those are going to get pricier next time they order.

By Jim Boyce 
September 24, 2019 
Source: Drinks-today.com