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The value of U.S. wine exports sank nearly 5% to $1.47 billion in 2018, reflecting a strong dollar and retaliatory tariffs, an industry trade group announced Monday.
The weaker exports also follow increased "competition from foreign wine producers who are heavily subsidized by their governments and benefiting from free trade agreements in key markets," according to the San Francisco-based Wine Institute.
"California wines performed well under very challenging circumstances as top markets continued to embrace our reputation for premium quality, leadership in sustainable wine growing and diverse offerings," said Robert Koch, president and CEO of the Wine Institute. (The Golden State accounts for more than 90% of the nation's wine exports.)
According to the trade group, total export volume dipped more than 1% to 375 million liters in 2018, with the volume of exports to China and Japan falling by double-digit percentages. Wine exports to China fell nearly 25% in value last year to $78.7 million and 13% in volume compared with 2017, coming after China last year increased tariffs on U.S. wines imported into mainland China.
Effective last September, China in response to tariffs imposed by the administration of President Donald Trump added a 10% duty on U.S. wine imports on top of a previous 15% levy it implemented in April 2018. With the two duties, the total tax and tariff rates for U.S. wine entering China jumped to nearly 80%.
"The long-term prospects for California wine sales in China, however, remain very strong," said Christopher Beros, the Wine Institute's trade director for China and the Pacific Rim.
Exports to Hong Kong were up 10% to $130 million in value last year and up about 9% in volume. For years, Hong Kong has been seen as a "back door" for U.S. wine to enter the mainland Chinese market because of lower import taxes.
"Exports to Hong Kong are a bright spot," according to Beros. "Clearly some of these wines are being re-exported to other countries including mainland China."
Meantime, U.S. wine exports to Japan fell 22% in volume terms in 2018 and 1% in value to $93 million. Australian, New Zealand and South American wines have given the U.S. more competition in the Asian marketplace.
"In 2018, U.S. wine exports to Asia experienced a softening compared to the healthy growth rates of the prior two years," Beros said. He added that exports to Vietnam, which is seen as a promising market for California wines, were up 51% from a small base.
Elsewhere, exports to Canada — the largest single country market for American wine — were up 1% in value to $448.7 million and volume was down 11%. U.S. wine exports to the 28-nation European Union were down 15% to $469.4 million last year while volume was up about 3%.
The Trump administration last May requested the help of the World Trade Organization to resolve a wine dispute with Canada over grocery store shelf access. But the new United States-Mexico-Canada Agreement, or USMCA, deal announced in late September included Ottawa agreeing to resolve a grocery store access issue and settling the WTO case brought by the U.S.
"Although a weak Canadian dollar has led to rising retail prices, Canadian consumers continue to buy premium and super-premium priced California wines," according to Rick Slomka, the Wine Institute's trade director for Canada. "As the retail landscape for wine sales in Canada evolves, we look forward to continued growth in government liquor stores but also anticipate greater access to new grocery distribution channels."