China edges closer to breakthrough on Australian wine tariffs

The standoff over China’s tariffs of up to 218% on Australian wine looks likely to finally be resolved as the Chinese ambassador has spoken out, saying the two countries are “moving on the right track”.

“Currently, Chinese authorities are reviewing and investigating our tariffs on Australian wine and things are moving on the right track, in the right direction,” Chinese Ambassador Xiao Qian told the Australian Financial Review Business Summit on Monday.

He stopped short of confirming whether a decision had been made, or giving a timeline for tariffs being lifted. Australia is hoping for the tariffs to be scrapped by the end of March, following a six month review by Chinese authorities. However, the Ministry of Commerce in Beijing did not respond to questions this week about when they would release the report, Bloomberg has said.

Australia’s trade minister Don Farrell said on Tuesday that the interim recommendation to remove tariffs on Australian wine was a “welcome development”. He said: “It vindicates the government’s preferred approach of resolving trade issues through dialog rather than disputation.”

In a separate statement, according to Bloomberg, foreign minister Penny Wong pledged to continue to push “for all remaining trade impediments to be removed.”

The punitive tariffs on Australian wine imposed by China have been enforced since March 2020, and were enforced to punish Canberra after then-Prime Minister Scott Morrison called for an international probe into the origins of Covid-19.

In the first year, the tariffs wiped AU$1 billion off Australian wine exports. Despite complaints to the WTO, the country continues to feel the full weight of tariffs from its former biggest market.

But an end to the China tariffs does not spell smooth sailing for Australia’s wine industry. A Rabobank report published in October 2023 said that if China reopened tomorrow it would still take Australia two years to clear the surplus 2.8 billion bottles languishing in tanks and cellars.

Just this month the Albanese government set up a task force to assist wine businesses with oversupply and financial pressures caused in part by the ongoing trade dispute. Reports of Australian vintners grubbing up millions of vines were also published this week.

But the country is holding out for news from China on the tariffs. Tim Ford, CEO of Treasury Wine Estates, Australia’s biggest producer, said this week that the company was poised to return to China, despite working to diversify since the trade dispute began.

The Penfolds owner referenced China’s plan in an exchange filing this week, adding that the final decision will be made in the “coming weeks”.