Australia’s wine woes unlikely to end with resumption of imports by China

With demand falling, analysts and winemakers say damage from tariffs could be irreversible

- Jonathan Pearlman

SYDNEY - Beijing's lifting of sanetions on Australian wine in late March marked a welcome turnaround in bilateral ties after years of acrimony, but it is not expected to rescue the struggling sector amid a fall in demand for wine in China and elsewhere.

Australia sold A$1.2 billion (S$1.06 billion) worth of wine in 2019 to China, which was then its largest bottled wine market. But the tariffs imposed in 2020 which were as high as 218 per cent -sent sales plummeting.

In 2023, Australian wine sales to China were worth just A$10 million. Winemakers and analysts in Australia say the damage could prove impossible to reverse, despite the removal of the tariffs, and that exports of Australian reds to China are unlikely to return to previous volumes.

Wine consumption in China was already on the decline since about 2017, as President Xi Jinping's austerity measures, which discourage lavish consumption, dampened demand. The impact of Covid-19 and lockdowns, and China's economic slowdown also contributed to this trend.

Then, the 2020 sanctions led to a surplus of wine in Australia, which was exacerbated by bumper crops of grapes in some parts of the country and a global oversupply.

As a result, prices of wine grapes in Australia were set to fall by about 9 per cent in the year to July 1, 2024 and then decline by as much as 4 per cent in the ensuing 12 months, according to government forecasts.