So will Treasury Wine Estates (TWE) be singled out by investors after China revealed details of its retaliatory duties on US food imports including pork, fruit, nuts and wine. The tariffs of up to 25% are a response to the Trump administration’s new tariffs on steel and aluminium imports?
TWE has been one of the stars of the ASX in the past year, rising more than 36%.
While the shares lost more than 5% last week and over 3% in March, they were still up more than 5% in the first quarter and were one of a handful of ASX 200 shares to show a gain. The ASX 200 lost 5% in the same three months.
TWE shares closed at $16.86 before Easter.
The Chinese government said the additional duties on 128 kinds of products of US origin were to be introduced from Monday “in order to safeguard China’s interests and balance the losses caused by the United States additional tariffs”, according to a statement posted issued in Beijing late on Sunday.
The highest additional tariffs of 25% will be imposed on top of existing duties on imports of US scrap aluminium and various kinds of frozen pork, the statement said.
An added 15% tariff will apply to dozens of US foods including fresh and dried fruits such as cherries, nuts such as almonds and pistachios, and wine and various kinds of rolled steel bars.
Most of those imports come from the US state of California.
The list is consistent with measures proposed by China last month when it said it was planning tariffs on $US3 billion of US imports. The response left out key US exports to China such as soybeans, of which the US exported some $US14 billion last year.
China has yet to provide any details on how it will react to the much larger threat $US30 billion of imports of mostly tech equipment and services.
Treasury Wine Estates exports wine from its Californian vineyards to China – but the amount involved is small as is the total value of all US wine exports.
The value of all US wine exports to China jumped 450% in the past decade, according to the American Wine Institute, reaching $US197 million in 2017. By way of contrast, the value of Australian wine exports in 2017 to China jumped 63% to a record $848 million.
Official figures from industry body Wine Australia released earlier this year showed total Australian wine exports climbed by 15% in 2017 to reach $A2.56 billion by value, thanks to the boom to China – the value of exports to the UK, US and Canada all fell slightly last year.
TWE owns and operates about 3,750 planted hectares of vineyards in the US, producing grapes for popular labels including Stag’s Leap, Beringer and BV Vineyards.
Peter Dixon, TWE’s managing director of Asia, Middle East, Africa and Global Travel Retail, told Drinks Business HK: last month “We’re confident we can manage the impact of any geo-political issues of this nature in the ordinary course of business. TWE has been diversifying our sourcing footprint, introducing other country-of-origin portfolios such as our French portfolio, building on our Australian and American portfolios, to allow us greater flexibility to manage situations like this. We’ll continue to focus on growing our American portfolio across all of our priority regions, including Asia.”
American wine exports to China are already expensive as under China’s existing regulations, wines are subject to an import custom duty, excise tax and value-added tax, which can increase the bottle price by 41%. Wine imports from countries such as Australia and Chile don’t have to pay such imposts because of free trade agreements.
Australian analysts say Treasury will be able to replace its US exports with wine from Australia.
