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How California wine sales are being hurt by trade war with China

Watch the hustle and bustle of a California wine grape harvest

Workers harvest pinot noir grapes at Talley Vineyards in Arroyo Grande, California, on a recent October morning as the Autumn grape harvest kicks into full swing.
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Workers harvest pinot noir grapes at Talley Vineyards in Arroyo Grande, California, on a recent October morning as the Autumn grape harvest kicks into full swing.

What effect is the trade war with China having on California wine sales? It’s not good. But for at least one Paso Robles grower, the pain just might be worth it.

The Chinese government announced that it would be increasing the tariff on U.S. wines in response to the ongoing trade dispute with the U.S. For sure, the increase is good news for American competitors.

Effective June 1, China will add another 15% tariff on U.S. wine imports to their country. That takes the total tax and tariff on U.S. wines shipped to China to 91% since they ratcheted up several times starting in April 2018.

“This is the third Chinese tariff increase on U.S. wine in the past 14 months, and with each additional round, it becomes more and more difficult to compete in the fastest-growing wine market in the world,” said Robert P. “Bobby” Koch, President and CEO of California-based Wine Institute.

Sales of U.S. wine to China were already off 25% in 2018. Most of those bottles were from California, according to the Wine Institute.

“It is imperative to resolve this dispute as soon as possible, so that our wineries do not suffer long-term market loss. Despite these challenges, the California wine brand remains strong with Chinese consumers and we are committed to doing everything we can to ensure this does not change ” Koch added.

Paso Robles grower and winemaker Serena Friedman of Four Sisters Ranch Winery farms 400 acres near the airport says she has been sending her top-quality wine to China for 17 years.

“The tariffs cost me several container loads of wine recently, and I’m not happy about it. Still, I am so proud of what our president is doing that could result in free trade in the future.”

Friendman added, “Most countries send their worst reject wines to China, but we send top-quality syrah, cabernet and zinfandel and our customers tell us they are so impressed.”

One label is called Serena’s Vineyard.

China is one of the fastest-growing wine markets in the world and will soon be second only to the U.S. in the total value of wine sales.

U.S. wine exports to China and Hong Kong have grown 450% in the past decade. U.S. wine exports to all markets abroad, more than 90% of which comes from California, reached $1.47 billion in winery revenues and 375 million liters (41.7 million cases) in 2018, according to the Wine Institute.

U.S. competitors in the world market include No. 1 producer France, followed by Italy and Spain. The United States ranks fourth.

Smaller producers like Argentina, Australia, South Africa and Chile are growing faster than the U.S. U.S. wine makers complain that EU countries subsidize their wine industry.

Paso Robles-based Independent Wine Growers president Joe Irick says this year smaller growers have concerns about oversupply again and notes the some companies like Gallo are cutting back on contracts.

“We tell growers, if you have contract, keep it. If you don’t have one, you’ve got a problem,” he said.

Ironically, the good news for the industry is that plenty of grape growers have pulled their vineyards for economic reasons or have been impacted by a virus in the past year, which has reduced supply.

The latest Chinese tariff could hurt another top crop from SLO. Strawberries are on the list, potentially impacting frozen strawberry exports to China.

John Lindt is the editor of sierra2thesea.net.
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