California wine exports hit tariff bumps

California wine is again taking a hit from China's tariffs, putting the product at a price disadvantage in the fastest-growing wine market.

China imposed another 10 percent tariff on US wine on Monday in response to the Trump administration's tariff against $200 billion worth of Chinese goods, which was implemented the same day.

The additional 10 percent tariff on US wine is on top of a previous 15 percent tariff increase implemented on April 2. The two rounds of tariffs increase the total tariff and tax rate on US wine exported to China to 79 percent.

"Since the first tariff was implemented in April, we have not shipped a single bottle of wine to the Chinese mainland," Michael Parr, vice-president of international sales for the vintner Wente Family Estates, told China Daily.

The Livermore, California-based Wente Vineyards, the oldest continuously operating family winery in the US, had been exporting to China for 23 years.

Compared with the zero shipments in the past five months, Wente's exports to China were up 14 percent in the first four months of 2018.

"Of course, the escalating tariff, now totaling 79 percent, is very worrisome," said Parr. "Not only are there plenty of Australian and Chilean wines readily available to Chinese consumers, they are also coming into China practically duty free," he said.

Wines from Chile, Georgia and New Zealand currently enter China tariff-free and pay only the 30 percent combined tax rate. Australian wines will be tariff-free starting in 2019.

"China continues to be an important market for California wines, but tariffs put our products at a price disadvantage," said Robert Koch, president and CEO of Wine Institute, an advocacy group representing more than 1,000 wineries in California.

According to the Wine Institute's forecast, China will soon be second only to the US in the total value of wine sales. The US wine exports (more than 90 percent from California) to the Chinese mainland and Hong Kong have grown 450 percent in the past decade and were up 10 percent to $197 million in 2017.

Despite the increased Chinese tariffs, US wine exports to China were up 14 percent in value to $38.4 million for the first six months of this year, compared with the same period last year, according to Wine Institute.

The organization's China team has been trying to engage Chinese consumers in second and third-tier cities throughout China by hosting promotional activities such as California wines educational master classes and a Greater China Vintner Tour in October.

However, Parr said "a big concern lies with Chinese consumers' general attitude toward buying US products".

"A potential boycott of US products would be more devastating than the actual tariffs," said Parr. "California wines can compete all day long when it comes to quality, but the implemented retaliatory tariffs are making it very difficult."