Turning sour: California wine growers feel tariff burden

Global Business

California wine producers are putting their expansion plans in China on hold. CGTN’s Mark Niu reports.

The Trade War between the U.S. and China lingers on. And in the meantime, many industries are feeling the heat, including Wine.

California accounts for 97% of the U.S.’s wine, leading many growers there to put expansion plans in China on hold.

An hour outside of San Francisco in the city of Livermore, Wente Vineyards exudes the California lifestyle.

With a championship golf course, restaurants and grape vines spanning across scenic landscapes, Wente has been a famil owned winery for more than 130 years.

Wente exports 25% of its wine around the world.

Less than percent of that ends up in China. 

But China is a top ten customer.

And during the first several months of 2018, exports to China were up 25%. Wente was on track for a record year.

That’s when China first responded to the trade dispute with a 15% tariff on U.S. wine, followed by another 10% in September and another 15% in June.

“We had a very good trajectory that then reversed itself,” said Eric Wente, Chairman of Wente Vineyards. “I think there’s quite a ways to go before everybody’s seeing eye to eye. I think that there’s just going to have to be a resolution. Hopefully it’s the classic compromise– nobody’s happy but everybody’s about equally unhappy.”

Overall U.S. wine exports to China dropped 25%in 2018.

Wente’s tasting rooms see visitors from China almost every day.

That’s why it has a special program that allows Chinese visitors to have their favorite wines delivered to their home from supplies in China.

“Because of the tariff situation we actually will be putting this whole process on hold because the wine inventory in China has dwindled down to the point where we are almost out of stock,” said International Sales Vice President Michael Parr.

Parr says while short-term revenues take a hit, the long-term effect is of even greater concern.

“We’ve invested in China. For 25 years, it’s invested in marketing programs and being over there, doing events,” said Parr. “Not only are we not shipping now. There are competitors who have jumped into the market.”

Parr says Australian and Chilean wines are taking valuable shelf space from U.S. makers because of their free trade agreements with China. 

“We can compete all day long with the best regions around the world in terms of quality of our wines,” said Parr. “But if the prices are not similar due to an uneven playing field, that makes it very difficult, if not impossible for us to compete.”

Parr also points out another trade burden – the Trump administration’s 10% tariff on Chinese glass, which raises costs and has them searching for other suppliers.

But Eric Wente remains hopeful that the trade war will only temporarily cork his aspirations of introducing more of the general population of China to a special taste of the California lifestyle.