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California wineries shut out from China amid trade war

www.sfchronicle.com by Shwanika Narayan17/04/2019  

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Vineyard workers reposition trellis wires in a Chardonnay vineyard at Wente Wines in Livermore. California wines make up 90% of U.S. wine exports by volume. China’s tariffs are hurting the industry.

When China imposed retaliatory tariffs on American goods last April, vintners at Wente Vineyards in Livermore feared the move would push them out of China, the world’s fastest-growing wine market, for months or years.

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Michael Parr, vice president of international sales at Wente Vineyards, walks past some of the wines the winery exports around the world. Wente Vineyards hasn’t shipped wine to China since it imposed retaliatory tariffs, after 24 years of doing business there.

They were right.

Wente Vineyards Wines hasn’t shipped wine to China since the tariffs took effect, after 24 years of doing business there. The whole industry is feeling the shift: A report this month from the Wine Institute, a trade group in San Francisco, found that the value of U.S. wine exports to China fell nearly 25% last year, to $59 million. Wine exports as a whole fell nearly 5%, to their lowest levels since 2012.

In China, “we are not competitively priced anymore,” said Michael Parr, vice president of international sales at Wente Vineyards. “It’s a lost opportunity for the entire California wine industry.”

California wines make up 90% of U.S. wine exports by volume. And they’re hurting well beyond China. The top market for American vintners, the European Union, saw a 15 percent drop in export sales last year to $469 million, partly because of the strong dollar. Two other major markets, Canada and Hong Kong, saw growth.

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Family-owned Wente Vineyards in the Livermore Valley exports one-fourth of the 700,000 cases it produces to 75 countries.

But the trade war with China has nonetheless dampened spirits throughout the industry. The wrangling began in March 2018, when President Trump slapped tariffs on $50 billion worth of Chinese goods, mostly non-consumer items like machinery and equipment. China promptly retaliated with tariffs on wine, fruits, nuts and other agricultural products.

The tit-for-tat has caused losses and uncertainty.

“We’ve been investing time, money and have been making trips there for more than two decades,” Parr said. “That is how we built China to be one of our top 10 export destinations. All of that momentum was disrupted because of these tariffs.”

Duties on U.S. wine shipped to China are substantial — 79% of the value, according to the Wine Institute. Wines from Australia, New Zealand and Chile face no tariffs in China and have gained market share.

“China is a crucial market for us, but right now we’re at a distinctive disadvantage,” said David Amadia, president of Ridge Vineyards in Cupertino. Tariffs caused the price of his wines on Chinese shelves to rise 33%, he said — and while it’s a small part of his business, it still hurt.

The tariffs came at a time when California wineries are thriving. They’re bringing in $1.5 billion in revenue, up 60% compared with a decade ago, according to Honore Comfort, the vice president of international marketing at the Wine Institute. The growth is not in volume but in value, as consumers trade up to high-end wines — which are increasingly in demand around the world, according to a spokeswoman for the Wine Institute.

In China, the tariffs have changed the trajectory.

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Guests mix their own blends at the Wine Makers Workshop at Wente Vineyards in Livermore.

“Besides the impact on producers, our national reputation has suffered in the last two years,” said Michael Havens, an export broker with the firm California American Terroirs. “There’s no question about that.”