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US wine exports drop to 6-year low thanks partly to Trump’s trade war with China

www.petaluma360.com by BILL SWINDELL11/04/2019  

The value of U.S. wine exports declined by 5 percent last year to its lowest level since 2012, in part because of President Trump’s trade war with China, the Wine Institute said Monday.

American wineries sold $1.47 billion of wine to foreign retailers in 2018. The overall volume also dropped 1.2% to 41.7 million wine cases, according to the institute, the main trade group for California vintners.

California wines comprised more than 90 percent of U.S. exports, with the premium bottles from Napa and Sonoma counties especially prized in international markets.

The European Union remains the largest market for U.S. vintners with $469 million in sales last year, a 15% drop largely because of a strong dollar. It was followed by Canada with $448 million in sales, up 1%.

The trade group said a strong U.S. dollar and foreign subsidies also played a role in the export decrease. The wine sales to China were particularly striking because there was nearly a 25% decrease in value of American wines sold there last year as a result of retaliatory tariffs imposed by Beijing in response to the Trump administration imposing higher taxes for Chinese steel and other products.

China represented the fifth-largest U.S. wine export market with $59 million in sales there last year. Increasingly, it is coveted by many local wine producers given the country’s population of 1.4 billion residents, as well as an emerging generation that values certain Western luxury goods.

The total tax and tariff on U.S. wine shipped into China is 79%, said Charles Jefferson, the institutes’s vice president of federal and international public policy. By comparison, Australia’s tax rate is 26% in China.

“That gives you a little bit of an idea of what we are up against,” Jefferson said. “It’s significant for sure.”

Still, the potential of China has lured local vintners. In 2014, the Sonoma County Vintners trade group were part of a trade mission in China to promote the county industry.

The efforts have been beneficial — even on a small scale. Alexander Valley Vineyards in Healdsburg made its first shipment of wine to China last year, a small batch of 160 cases, said Robert Wetzel, national sales manager for his family owned winery.

The winery recently shipped another 200 cases there. And there is more potential sales after the winery’s Shanghai distributor has indicated some of the Alexander Valley wine will be stocked in the first Costco in China slated to open this summer, Wetzel said.

“If those tariffs were a lot lower, you would have a lot more exporting going on,” he said. But Wetzel credited the Healdsburg winery’s Shanghai distributor for helping navigate the wine market in China’s main financial hub.

Worldwide exports only make up about 2 percent of the winery’s overall sales, but Wetzel said the family business has its eyes on the Chinese market for the long haul.

In the midst of the trade spat with China, Trump has signaled some willingness to end the dispute. Last month, the president asked China to drop the additional tariffs on U.S. agriculture products it has targeted — including soybeans, fruits and nuts — since he delayed a second round of scheduled U.S. tariffs.

Still, the tariff strategy triggered criticism from a local lawmaker.

“This administration’s tariffs are disruptive to all of agriculture, including the wine community. They are hurting our district’s economy and farm communities across our nation. The fact that California’s wine exports performed well despite these misguided trade practices are a testament to their high quality,” said U.S. Rep. Mike Thompson, D-St. Helena.

Regarding other major buyers of U.S. wines, the Hong Kong market was the third-largest in 2018 at $129 million, a 10% increase. The territory is part of China, but not under the new tariffs. Those numbers indicate the overall Chinese market remains ripe for growth, Jefferson of the Wine Institute said.

Japan was the fourth-largest market with $93 million in export sales, a 1% decline.

Early in his term, Trump pulled the United States out of the Trans-Pacific Partnership, a trade agreement that rewrote commerce rules for 12 Pacific Rim countries.

That trade pact would have lowered U.S. wine tariffs into Japan on a pathway to zero tariffs over an eight-year period. Australia, meanwhile, will go to zero tariffs by April 2021.