Australian wine exports crushed by Chinese tariffs

China’s punishing tariffs on Australian wine launched last year have had a deadening impact on exports.

Winemaker Greg Follett from Lake Breeze Wines: ‘Exports to China have completely stopped now.’ Picture: Tait Schmaal

China’s punishing tariffs on Australian wine launched last year as part of a wider political and trade dispute between Beijing and Canberra have had a deadening impact on exports, with Australian wine sold into China slumping by 98 per cent in the first month the tariffs were applied.

Following the release of export data that illustrated the damage wrought by 200 per cent-plus tariffs inflicted by China, Wine Australia chief executive Andreas Clark said that in December 2020 only $4m worth of Australian wine was sold to China, compared with $173m in December 2019.

The massive dive is expected to continue into 2021, robbing Australia of a wine market once worth more than $1bn a year but now almost worthless, and leaving industry insiders pessimistic that other markets such as North America and the UK can buy enough wine to repair the damage.

In November, as the trade war intensified between China and Australia, a number of key commodities such as coal, seafood and timber were targeted for sanctions or blockade, along with tariffs on Australian wine.

Wine exports to mainland China for calendar 2020 were down 14 per cent to $1.01bn.

“It will continue to go south very quickly, where that lands — whether it is zero or stays a little bit above that — remains to be seen,” Mr Clark said.

“As we get each month’s figures we will have a clearer understanding, but everything I am hearing points to an ongoing and severe drop in exports.”

Overall wine exports are showing the early signs of the tariffs, with total exports in the 12 months to December 2020 slipping 1 per cent in value to $2.89bn.

According to Wine Australia’s latest Export Report there was a 0.5 per cent increase in volume to 747 million litres (83 million nine-litre case equivalents) and a 1 per cent decline in average prices to $3.87 per litre free on board.

Mr Clark said that there had been a sharp increase in exports from August to October, primarily to mainland China and the UK, while the decline over November and December was predominantly in exports to China.

Exports to China were immediately down following the imposition of the temporary tariffs in November. The sharp decline in the final two months of the year saw the overall value for 2020 decline by 14 per cent to $1.01bn and volume drop by 29 per cent to 96 million litres.

Exports to the Britain for 2020 were up 29 per cent to $456m and to the US were up 4 per cent to $434m.

Winemaker Greg Follett from Lake Breeze Wines said exports accounted for 30 per cent of the South Australian company’s 30,000 case production.

“Half of those exports were to China, so we did feel the impact of the issue with China, but the domestic market has been strong and we have kept up exports to other markets,” said Mr Follett, who is busy with grape harvesting season.

“Most of the wine we supplied as a result of a spike in demand in China from March to July in 2020 got through the system with a few cases still stuck in warehouses.

“Exports to China have completely stopped now.

“Domestic sales online and an increase in cellar door sales have been good. It’s a good sign that we haven’t been on JobKeeper for the last six months.”

Additional reporting by Valerina Changarathil