Australia's wine market and economy are expected to take a hit.
China has temporarily imposed tariffs of up to 200% on Australian wine, the latest target in its trade war, following coal, lobsters, barley, beef, sugar and others in recent months, according to GlobalData.
“Many observers conclude that these decisions are based mainly on strategic overlapping of political and trade positions rather than a response for some objective issues,” GlobalData's consumer analyst Ryan Whittaker said.
China is noted to be Australia’s leading trading market, accounting for around a third of its national exports, as well as its most lucrative market for Australian wine, which is worth nearly four times the value of the US export market.
Combined with a projected 7% unemployment rate for 2021 and the GDP contraction in April–June, the effect of China’s strategy will brutally impact the Australian wine sector and destabilize the wider economy for the next few years, Whittaker said.
As a result, more wine stocks might be allocated at cheaper prices to the next-largest export markets, including the US, the UK, and Canada. However, these markets are also suffering pandemic downturns, and unemployment in the US and the UK may have reduced the disposable income in these markets.
“In addition, the reduction in social occasions due to the pandemic means that demand for wine will remain suppressed, falling in tandem with future national and regional lockdowns. Following mass-vaccination. However, the demand for wine in these markets will likely increase quickly,” Whittaker added.
“Australian wine exporters will have to hope that a political solution is reached quickly as they will suffer as long as this continues.”
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