CALIFORNIA WINES’ EXPORT TO CHINA DECLINED 25% DUE TO TRADE WAR
By David Ma
The value of California wine export declined by 4.8% in 2018 to its lowest level since 2012. The Chinese market was the biggest contributor to the decline with export to China decreased by 25%, largely due to President Trump’s trade war.
According to the Wine Institute, the main wine trade body in California, the decline was a result of retaliatory tariffs, a strong dollar and competition from foreign wine producers who benefit from free trade agreements in key markets.
As a whole, USA wine exports reached USD1.47bn in revenue and 3.75 hectoliters (41.7 million cases) in 2018, with more than 90% coming from California.
The trade group said wine sales to China particularly underperformed with a 25% decrease in value last year as a result of retaliatory tariffs imposed by Beijing in response to the Trump administration’s punishing tariffs for Chinese steel and other products.
“The nearly 25% decline in exports to China by value was the largest contributor to the softness (in 2018), primarily the result of trade issues between the USA and China and the increased tariffs on USA wines imported into mainland China,” said Christopher Beros, Wine Institute trade director for China and Pacific Rim.
USA producers have to pay a punishing 39% just on tariffs when exporting to China, adding VAT and excise taxes on all imported wines, the total tax bill is about 80%, much higher than the 48% faced by most other countries.
Worse still, New world producing countries like Australia, New Zealand and Chile, which are Californian wines major competitors in the Chinese market, are now enjoying tariff free status because of the free trade agreements between their governments and China.
Despite the overall decline, some Asian markets performed well last year. The Hong Kong market, which is California wine’ third biggest export market, saw a 10% increase at USD129 million. The city is part of China, but has an independent customs regime.
“The long-term prospects for California wine sales in China, however, remain very strong. Exports to Hong Kong are a bright spot. Clearly some of these wines are being re-exported to other countries including mainland China,” said Beros.
“Exports to Vietnam increased by 51% from a small base. Vietnam is a promising market for California wines with its huge population, young average age, and aspirational consumer psychographics,” he added.
The top 10 export markets for California wines are:
European Union USD469m
Hong Kong USD130m
South Korea USD25m
Dominican Republic USD14m
(the writer can be contacted at: DavidMa@thewinechronicle.com)
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