Australia Struggles With Wine Tariffs

For years, China’s thirst for Australian wine seemed insatiable. Chinese drinkers were so passionate about big-bodied red wines from Australia that many vineyards replaced white grapes with darker varieties. Wineries even reverted to using corks — instead of convenient screw tops — because Chinese consumers liked the traditional plug.

But then everything unraveled. In April 2020, Australia’s prime minister at the time, Scott Morrison, called for an independent investigation into the origin of Covid-19. Beijing was furious, denouncing “political games” meant to assign blame for the pandemic.

In response, China imposed a tariff on Australian wine, and the country’s biggest overseas market vanished almost immediately. Sales to China plummeted 97 percent that first year. Storage tanks overflowed with unsold shiraz and cabernet sauvignon, pressuring red grape prices.

This year, there is even less demand for red wine. Farmers are choosing between selling at a loss or not harvesting.

On his 50-hectare farm in Australia’s Riverland region outside Adelaide, Mauro Travaglione has not produced any wholesale red wine since the tariff came into effect. Last year, he sold his red grapes to other wineries and felt lucky to do so, even though he barely covered his costs.

“Every day is a struggle,” said Mr. Travaglione, whose family has lived in South Australia since his parents bought a fruit farm there in 1966. “You have to seriously think: Is it worth continuing on?”

The Chinese economy is the world’s second largest, and the threat of losing access to its 1.4 billion consumers is one that few countries can afford to provoke. But in recent months, China has embraced a softer approach, fueling hope that relations may improve. In November, China’s top leader, Xi Jinping, and Australia’s prime minister, Anthony Albanese, met at a gathering of the Group of 20. A month later, Foreign Minister Penny Wong became Australia’s first top diplomat to visit China in four years. The two sides agreed to a dialogue on trade.

China went from being the biggest buyer of Australian wine, accounting for 40 percent of exports, to 23rd, below countries like Sweden. Since roughly 95 percent of Australian wine bought in China was red, Riverland farmers had added 650 hectares of cabernet sauvignon, shiraz and merlot vines in the last decade, even as the total area devoted to grapes shrank, according to Wine Australia.

“We were seduced by China,” said Tim Whetstone, a member of South Australia’s House of Assembly representing the Riverland, the country’s biggest grape-producing region. He estimated that half the region’s red grapes would not be harvested this year.

Accolade Wines, a conglomerate, told its cooperative of Riverland farmers that it wanted to ease the glut and would pay farmers to put vines in a dormant state and not produce fruit for sale this year. Accolade also offered to pay farmers to switch red grape vines back to white.

Melanie Kargas, a manager for CCW Co-operative, a collective of about 500 Riverland growers, said she had never heard of such offers.

Mr. Travaglione’s parents were born into winemaking families in Italy, and he had long hoped that his children would take over the farm. But now Mr. Travaglione, 55, is reconsidering. When his son expressed an interest in winemaking, he encouraged him to explore other careers. His son will study engineering at a university next year.

He said, “It’s hard to encourage the younger generation to come into the industry.”

Growers suffer from a glut of red grapes and falling prices.