Winner of US-China trade war might be Chile

As the world’s two biggest economies engage in a trade war, Chilean wineries might be the big winners with exports to China already on the rise.

Concha y Toro vineyards

American wine exports to mainland China last year totalled US$75.6 million, the highest in years, but the recent punitive tariff introduced by the Chinese government in retaliation to the Trump administration has consequently dampened American wineries’ hope of expanding their foothold in China.

Other New World producers such as Chile, China’s third biggest source for wine, is poised to seize the opportunity and replace much of the US$75.6 million exported to China by US producers, especially in the premium wine sector.

The two countries have already signed a Free Trade Agreement, and China has surpassed the US to become Chile’s most important export market. In 2017, China imported roughly US$254 million worth of Chilean wines, a year-on-year increase of 30%, according to figures by Wines of Chile.

“We believe Chile is walking at a good pace to position itself as a premium category in China. The whole Chilean wine industry and its respective partners in China are committed to that mission,” Julio Alonso, Wines of Chile Asia director, told dbHK.

Continuing, the trade executive added that the association is promoting wines above RMB 160 – RMB 200 (US$30) sold through off-trade and online platforms, and wines above RMB 300 (US$45) in the on-trade, in China.

“We have an advantage in terms of quality and diversity in wines over US$ 60 (9-litre case) and up, but especially in a segment that goes from US$60 to US$120 (a case) where, in our opinion, Chile has the greatest development potential and where it is a threat to other origins of both from the Old and the New World,” he expanded.

The country’s leading producer Concha y Toro is among many producers looking to expand exports to China, with a particular focus on premium range.

At the moment, American wines entering China are subject to a total of close to 68% taxes now including 25% import tariffs, consumption tax and VAT, while Chilean wines has been enjoying zero import tariffs since 2015, thanks to the two countries’ FTA.

Chile currently ranks as China’s third biggest source for wine after France and Australia, taking up about 24% of market share, according to customs data.

“My view is that even though it is true that additional taxes on American wines might help Chilean wines and also others, in a large and deep market like China, it is actually more relevant to have a robust strategy that addresses consistently all relevant opportunities that a large and deep market like China has to offer,” with local partners, Carlos Longhi Leinenweber, corporate brand owner of Concha y Toro, told dbHK.

“In my view, is with this business approach where we have the biggest opportunities, especially for our premium and fine wine brands in the short and also long term,” he emphasised.

Australia is another country that is likely to cash in on American’s loss in China. However, with the recent political friction between the two countries, there are still uncertainties hanging over the two countries’ trade.

But the general sentiment among Chinese importers as the tariffs sink in is to deplete current American wine stocks, a few Chinese importers quoted by Hong kong-based Chinese newspaper Wen Wei Po revealed.

“I will certainly give up on American wines because of the increased tariffs since overall taxes amounted to some 68%”, a Shandong province-based importer told the newspaper. Without FTA agreements, imported wines to China in general are subject to about 48% of taxes.

*The article has been updated with quotes from Concha y Toro.