China’s punitive tariffs of up to 218% on Australian wines are not only corking Australian wine exports, but also having a “detrimental impact” on Australia’s performance in the secondary market, according to Liv-ex.
Late November, Beijing introduced provisional tariffs of 107% to 212%, with further 6.4% ‘anti-subsidy’ tariffs on Australian wines following a twin investigation announced in August.
These latest tariffs, ranging from 116% to 218%, were formalized in March 2021, and while Australia intends to appeal to the World Trade Organization, they are set to remain in place for the next five years.
As China is Australia’s biggest wine export market in value terms (nearly 40%), the tariffs have forced Australia to look elsewhere to fill the void.
Leading the pack
On secondary market, Australia has long been among the biggest drivers behind the expansion of the Rest of the World (RoW) category’s trade share, referring to countries such as Australia, Spain, Germany, Chile, South Africa and New Zealand other than France and Italy. The RoW category has been touching record highs, as the fine wine market has broadened beyond the traditional strongholds of Bordeaux and Burgundy. This time last year, RoW took 9% of the total market share by value.
Then, Australia accounted for 45.3% of the RoW’s value trade but as of last month, the percentage was squeezed to 17% due to the tariffs.
Since the tariffs were introduced, Australia’s monthly trade share by value has almost halved and there has been a notable decrease in the number of wines trading, as seen in the chart above, writes Liv-ex.
Before the tariffs, the number of distinct Australian wines (LWIN11s) was rising gradually on an annual basis, up 304% between 2015 and 2020.
On a monthly basis, August 2020 marked a record in the number of distinct wines (LWIN11s) changing hands – 83, the same month when the anti-dumping and anti-subsidy investigations were announced.
In March 2021, only 28 Australian wines were traded on Liv-ex. The number of trades initiated by Asian buyers in March is down 80% over the same period, with the value traded down 59%.
Today, Australian secondary market trade is led by its biggest price performer, Penfolds Grange, and specifically its vintages 2010, 2016 and 2008. The 2015 and 2013 vintages of Torbreck’s ‘The Laird’ have also enjoyed some activity. Yet the newly imposed tariffs have significantly narrowed the range of Australian wines that are finding willing buyers.
It’s clear that the Chinese tariffs have had an immediate effect, and it remains to be seen if the impacts will be long-term.