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Panic as China raises tariffs on US wine

Panic as China raises tariffs on US wine

The United States wine industry is reeling following the announcement that China will raise tariffs on US wine by a further 15%.

California's Wine Institute said: "Effective June 1, China will add another 15% tariff on US wine imports to their country. The additional 15% tariff is on top of a previous 15% tariff increase implemented in April 2018 and another 10% increase in September 2018. When compounded, the new total tax and tariff rate will be 98%."

Wine Institute CEO Robert Koch added: “This is the third Chinese tariff increase on US wine in the past 14 months, and with each additional round, it becomes more and more difficult to compete in the fastest-growing wine market in the world.

"It is imperative to resolve this dispute as soon as possible, so that our wineries do not suffer long-term market loss."

US wine exports to China and Hong Kong have grown 450% in the past decade. However, exports to China were down 25% in 2018. 

The wine tariffs form part of China's defiant response to the US Trade Representative’s office releasing a list of about $300 billion worth of Chinese goods including children’s clothing, toys, mobile phones and laptops that President Trump has threatened to hit with a 25% tariff.

The threat came after a Chinese delegation led by Vice-Premier Liu He failed to reach a deal with the US in Washington.

The Chinese Finance Ministry said: “China hopes the United States will return to the right track of bilateral trade negotiations, work together with China and meet China halfway to reach a mutually beneficial and win-win agreement on the basis of mutual respect and equality.”

Trump has since fired off a series of inflammatory tweets warning China not to retaliate against new US tariffs, saying: “I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries.”

He also tweeted: "Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!

“There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken advantage of the US for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliate - will only get worse!” 

China did not respond favourably to Trump's tweets.

Shortly before the Chinese finance ministry announced the new tariffs, China’s state broadcaster CCTV stated during the country’s most watched daily news program, Xinwen Lianbo: “China has already given its answer [to the US]: if you want to talk, our door is wide open; if you want to fight, we'll fight you to the end."

Australia caught in the middle of wine battle

China eliminated tariffs on Australian wines in January 2019 as part of a free trade deal between the two nations.

The New York Times reports that China has become a far more important export market than the US for Australian winemakers.

"Since 2008, Australia’s wine exports to the United States have fallen 37%; exports to China have risen 959%," it notes. 

"Around the globe, longtime allies are planning for a world in which the United States is no longer the economic center. For all the frustrations of doing business with China, including opaque government action and allegations of intellectual property theft, the sheer logic of economic geography is proving more significant than historical alliances.

"The tension is evident in many countries with deep economic ties to the United States, including South Korea, Japan and Germany. But perhaps nowhere is the tug more vivid than in Australia, long one of America’s closest allies, which now finds itself pulled in the opposite direction by China, its largest export market.

"The Australian wine industry was once almost entirely focused on domestic production, then expanded to exporting to Britain and then the United States. But in the last 10 years, three forces have combined to make China the largest export market for Australian wine. The ranks of the Chinese middle class have grown astronomically. A 2015 trade agreement between the two countries reduced tariffs. And an extensive marketing campaign has helped ensure that many Chinese consumers would favor Australian labels."

It concludes: "What is sensible for Australia’s economy and geopolitics means that what was once a special relationship with the United States is no longer quite so special."