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Summary
- China-Australia war gets heated up again after China raises wine tariffs to 200 per cent for Australia.
- The Chinese Ministry of Commerce has opened an investigation into alleged accusations, which Australian officials denied.
- Experts fear this decision might be fatal to the Australian wine industry, as Europe now has a significant advantage to expand on the Chinese drink market.
- As hundreds of shipping containers were waiting to get processed in China, all the wine that is at hold will be subjected to new tariffs that could go up to 212 per cent.
The Chinese government has introduced new taxes for the Australian wines, putting a high risk to the A$1.2 billion annual business. The new tariffs will be effective from tomorrow.
The news came after China’s drink industry accused Australia of deliberately reducing prices of its wine products, so that Chinese wine would not stand a chance at local markets. Ministry of Commerce in China has already issued an opening ruling regarding these accusations.
The final investigation will be finalised sometime next year, but the Commerce Ministry said Australian importers would need to pay some money for security deposits in regard to the issue. The Australian wine industry has denied allegations coming from the Chinese officials.
The tariff is set to be at a minimum of 107 per cent and a maximum of 212 per cent.
Once the news got confirmed, Treasury Wine Estates (ASX:TWE), one of the most significant exporters in Australia, saw a plunge of over 11 per cent in their shares. The company had put a stop to trading stocks until Tuesday next week.
What does this mean for the Australian wine industry?
Most experts believe that China is putting the Australian wine industry at a significant risk. Europe, the biggest competitor to the country, now has a great advantage to spread its wings in the Chinese market.
Trade minister Simon Birmingham agreed with the expert opinion, adding the Chinese government has no evidence for its claims. He also added that many Chinese consumers are likely to turn away from the Australian wine, which will leave a severe impact on the wine industry overall.
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How much wine is going to China?
According to the officials, numerous shipping containers form Australia were stopped at the Chinese shores, after the new laws were passed on earlier this month. It was estimated that around 80 to 90 per cent of Australian wine exports were denied entry into the country.
Now, with the new tariffs in place, all wine that gets imported to China will face massive taxes and hurt the industry immensely. A lot of that wine is still waiting at customs overseas.
Many wine exporters from Australia have consequently stopped exporting their products to China.
Ever since the tariffs have been imposed, Agriculture Minister David Littleproud is working hard to make better trade relationship with China. Mr Littleproud firstly wants to get on top of the problem that resulted in ‘outrageous’ tariffs, and then figure out what to do next.
With this news, Australia and China prolonged their trade war even deeper. As the barley industry has already been suffering the consequences of the problematic relationship, the wine industry is yet to feel the impact of not importing 40 per cent of the business offshore.
