End of China’s Trade War with Australia over Wine: A Temporary Truce? Chris Lehoux, April 10, 2024 The Australian wine industry breathes a sigh of relief as Beijing lifts the punitive tariffs, but is the Chinese market still promising? 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”. 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 claimed that Australia was undercutting local wines by dumping inexpensive wine into the Chinese market and that the Australian government was subsidizing wine exports. However, there was no proof for either of these assertions. Before the tariffs, the largest wine export market for Australia was China, with a value of approximately $790 million (AUS$1.2 billion). This trade rapidly shriveled. When Albanese went to China in 2023, sentiments of hope were revived. This state visit was the first by an Australian Prime Minister since 2016. Following the announcement of the visit, China consented to reassess the tariffs, leading to their removal on March 29. The most profitable import business in China was owned by Treasury Wine Estates prior to the tariff imposition, largely due to the brand, Penfolds, and its enormous success in the Chinese market. Tim Ford, the CEO, in a public statement, expressed the delight of the industry at the removal of tariffs on Australian wine exports to China. While there’s an atmosphere of excitement about the tariffs’ removal, Ford is cognizant of the forthcoming obstacles. He expressed anticipation for bringing more premium and luxury Australian wines back to the Chinese market, but with a mindful approach towards the time required to sustainably regrow both demand and supply. 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 consumer, but we would be very naive to think that the sales of our wine will fast return to those of 2019,” says Katherine Brown, a fourth-generation winemaker and local area marketing manager at the large, family-owned, Victoria-based business Brown Family Wine Group, to Wine Spectator. “We have a lot of work to do to rebuild ‘Brand Australia’ in this market, and we can only do this if the whole Australia offer is based on consistent quality and that we hold back on offering our wines at low prices.” Questions remain as to how best to reenter the Chinese market. Mitchell Taylor, third-generation winemaker and managing director at Wakefield Wines in the Clare Valley region, says their preferred avenue is the premium end. “We will focus quite a bit of attention on this market, as they appreciate our finest wines,” he said. They plan to spotlight their top wines, which range from $130 to $1,000 per bottle. Michelle Geber, managing director at Château Tanunda in the Barossa Valley, believes that while China has potential, it cannot be the only focus. “It’s important for any company to manage risk and diversify,” she told Wine Spectator. “We will be reengaging with the market using a focused approach. We are aware wine consumption in China has dropped, but there are key provinces in China that are still interested and engaged in premium wines. We are a global company with wines being sent across the world.” Richard Burch, sales director for Margaret River wine group Burch Family Wines, highlights that Australia has also witnessed transformation in the last four years. “The Australian wine industry has shrunk,” he expressed. “Numerous business models have been revised, and people have altered their plantings and switched to different styles of wines [concentrating on] lighter dry reds and aromatic whites.” Despite possible hurdles in the future, the prospect this evolution provides cannot be contested. “Since the imposition of tariffs in 2020, 64 million Chinese [individuals] have attained the legal drinking age of 18,” Brown explained. “We now hold the possibility to enlighten this fresh consumer group about Australian wine and supply them with wine that is delightfully palatable and demonstrate to them how our wines attribute to their events.” Remain updated with consequential wine narratives with Wine Spectator‘s complimentary Breaking News Alerts. Nov 1, 2021 Jun 15, 2021 Apr 5, 2021 Mar 5, 2021 Mar 4, 2021 Nov 1, 2021 Jun 15, 2021 Apr 5, 2021 Mar 5, 2021 Mar 4, 2021 About the Author: Chris Lehoux Meet Chris Lehoux, an experienced wine connoisseur and dedicated blogger with a deep passion for all things wine-related. With years of expertise in the industry, Chris shares insightful wine reviews, valuable wine tasting tips, expert pairing advice, and captivating tales of vineyard visits. Join Chris on a journey through the world of wine, where every sip is an adventure waiting to be savored! Wine