Temporary Chinese tariffs will severely impact Australia’s wine exports, says GlobalData

Following the news that China has announced tariffs of up to 200% on Australian wine from 28 November 2020;

Ryan Whittaker, Consumer Analyst at GlobalData, a leading data and analytics company, offers his view:

“The temporary tariffs which China has imposed on wine imports will severely impact Australian wineries and the wider Australian economy. Wine imports are China’s latest targets in its trade war with Australia, following coal, lobsters, barley, beef, sugar and others in recent months. Many observers conclude that these decisions are based mainly on strategic overlapping of political and trade positions rather than a response for some objective issues. Combined with the economic consequences of COVID-19, a projected 7% unemployment rate for 2021 and the GDP contraction in April–June 2020, the effect of China’s strategy will brutally impact the Australian wine sector and destabilize the wider economy for the next few years.

“China’s move could result in more wine stocks being allocated at cheaper prices to the next-largest export markets, including the US, the UK and Canada. However, these markets are also experiencing significant economic downturns due to COVID-19. Significant unemployment in the US and the UK, coupled with uncertainties around Brexit, is likely to reduce disposable income in those markets. In addition, the reduction in social occasions due to the pandemic means that demand for wine will remain suppressed, falling in tandem with future national and regional lockdowns. Following mass-vaccination. However, the demand for wine in these markets will likely increase quickly.

“According to GlobalData’s research, as of November 2020, *1 in 4 UK consumers are buying less wine or have stopped purchasing it altogether as a result of the pandemic; for the US, the rate stands at 1 in 5. This means that Australian wine exports will remain caught between a rock and a hard place for the immediate future.

“China is not only Australia’s leading trading market, accounting for around a third of its national exports, but also its primary wine export market. China is the most lucrative market for Australian wine, worth close to four times the value of the US export market. Australian wine exporters will have to hope that a political solution is reached quickly as they will suffer as long as this continues.”

*GlobalData’s COVID-19 recovery tracker – UK, US – published 10th November 2020 – combined responses: “I have stopped buying this”, “I am buying significantly lower quantities than before”, “I am buying slightly lower quantities than before.”

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