California braces for Wine Month under shadow of US-China trade disputes

LOS ANGELES - While the 15th California Wine Month highlighting the state's 250-year-plus winemaking history will kick off from Sept 1, the industry is worried about losing its fastest-growing export market due to the trade war ignited by the White House last year.

According to a press release issued Tuesday by the Wine Institute, a leading wine industry trade group in the United States, the Golden State will host a series of events in the annual Wine Month, including special tastings, concerts, food and wine festivals, immersive harvest experiences, grape stomps and more, to promote the local wine.

As the world's fourth-largest wine producer and the source of 81 percent of wine made in the United States, California is home to 3,900 wineries and 5,900 grapegrowers. It is also the nation's most-visited state for wine and food experiences, attracting 24 million visits annually to its wine regions.

However, the annual celebration of the harvest season is under the shadow of trade war between the United States and China as the latter is viewed by global wine industry as a barely tapped opportunity, given its exploding middle class and growing appetite for the quality and prestige of imported wine.

US wine exports to China were down by 33 percent in the first half of this year the same period in 2017, Honore Comfort, vice president for international marketing at the Wine Institute, was quoted by the Los Angeles Times' as saying. As the trade conflict drags on, "Chinese importers will buy from a different country," he said.

In response to US tariffs, China has slapped retaliatory taxes on US imports ranging from electronics to soybeans since last year. The report said that for American wine, taxes and tariffs now amount to a 93-percent surcharge on every bottle. That's double the amount on French wine, and at the same time, wines from Australia and Chile, which have signed free trade agreements with China, taxed at just 26 percent.

"China was our fastest-growing export market," said Comfort. "We've worked on building those relationships for two decades. Now all of that time is basically a loss."

US wine exports reached $1.47 billion in winery revenues and 375 million liters (44 million cases) in 2018.

A strong dollar, retaliatory tariffs, competition from foreign wine producers, were listed in a report this April by the Wine Institute as main factors affecting the exports to China and the world.

The California-based Wine Institute said that comparing to 2017, US wine exports, over 90 percent of which are from California, were down 4.8 percent in value and 1.2 percent in volume last year, emphasizing that exports to Japan and China, which are the fourth and fifth biggest market of US wine, fell by double-digit percentages.

"In 2018, US wine exports to Asia experienced a softening compared to the healthy growth rates of the prior two years. A nearly 25 percent decline in exports to China by value was the largest contributor to the softness, primarily the result of trade issues between the United States and China and the increased tariffs on US wines imported into the Chinese mainland," Christopher Beros, Wine Institute Trade Director for China and Pacific Rim, said in a press release.

He said the US wine exports to China in value in 2018 was $59 million. Meantime, the exports to Japan fell 22 percent in volume in 2018 and 1 percent in value to $93 million.

Food & Wine, a popular monthly magazine in the United States, also reported Monday that for some Californian producers looking to boost business by selling to China, the tariffs already imposed by the US administration and the retaliatory tariffs enacted by China had proved disastrous.

The report also cited a story published by Bloomberg on Saturday as saying that US President Donald Trump tossed out the idea of adding a duty as high as 100 percent on French wine in retaliation for France's plan to add a 3-percent tax on the revenues of American tech companies like Facebook and Amazon.

"In theory, these two policies could work in tandem: French wine is too expensive to buy in America, and American wine is too expensive to sell in China, so sell the American wine to Americans to solve both problems. Except that kind of protectionism can be shortsighted," the Food & Wine's comments read.