San Francisco Chronicle - (Sunday)
Trade war hits vintners, farmers hard
Since 2015, NBA star Dwyane Wade’s Napa winery has been shipping bottles of Cabernet Sauvignon and Malbec to China.
Business was growing briskly. That first year, the company sold 96 cases with 12 bottles each in China. In 2017, business reached 2,100 cases, accounting for $600,000 in sales or around 85 percent of the winery’s total, said Jamie Watson, a partner at D Wade Cellars.
Now, D Wade Cellars left the Chinese market, following an escalating trade war between the U.S. and China. In April, Chinese tariffs on American wine increased from 48 percent to 63 percent. On Sunday, the tariff is set to rise again to 79 percent.
The escalating trade war between China and the United States is threatening commerce worth hundreds of billions of dollars, but some businesses in California appear to be particularly at risk. The state accounts for around 90 percent of all U.S. wine production, as well as most of its almonds, walnuts and other crops. Many of those products are subject to new tariffs, which mean a swift change of course for farmers, vintners and others who were counting on China as a market.
For Wade, China was a natural destination. The basketball
player is popular in the country and has a sponsorship deal with Chinese apparel company Li-Ning. Earlier this year, he was offered a threeyear, $25 million contract to play for a Chinese team, though he eventually opted to rejoin the Miami Heat.
“We lost our importer. It’s killed our market for it,” Watson said. “Our $35 bottle of wine in the U.S. turns into a $100 bottle over there.”
The company is now shifting to sell more wine in the U.S. and Canada. Watson hopes to return to China eventually, but the brand’s exposure in China is dropping every day it’s gone from the market, he said.
“The brand awareness, the market share, is going to diminish even further. To claw that back when this thing ends — I think it’ll be even more difficult,” said Watson.
“China continues to be an important market for California wines, but tariffs put our products at a price disadvantage,” said Robert Koch, CEO of the Wine Institute, an industry group in San Francisco. “We will continue to engage enthusiastic Chinese consumers with confidence that the popularity of California wines will continue to grow.”
The Wine Institute said China will soon be the second-largest wine market in the world, behind only the U.S. in value. U.S. wine exports to China and Hong Kong jumped 10 percent to $197 million last year, and have surged 450 percent in the past decade.
Wine is just one industry where the new tariffs have caused concern and confusion.
Julie Adams of the Almond Board of California said most of the agriculture community in the Central Valley is worried about the new tariffs.
“We’re a very important product here in the valley, and a lot of communities really rely on almonds for their livelihood, so anything that can disrupt or impact trade is a concern,” Adams said.
Adams said when the steel and aluminum tariffs were imposed in the spring — the first salvo by the Trump administration against Chinese imports — there was some hesitancy from importers to place orders.
Last year, California exported 170 million pounds of almonds to China and Hong Kong, the California almond industry’s third largest export destination.
Craig Yeung, general manager of Central Computers, which is based in Santa Clara and has five locations around the Bay Area, said the electronics industry is dependent on China, so tariffs could hit it hard.
“For our business, it’s potentially negative because basically all electronics are made in Asia or have some manufacturing component in China,” Yeung said. He added that there’s uncertainty among wholesalers and retailers about which products will be hit, but the tariffs would likely increase the price of products for consumers. Apple had expressed concerns that its Apple Watch and AirPods might be affected, but smartwatches and Bluetooth headphones were taken off an early list of tariffed products, according to reports.
There’s one farmer who’s a notable exception to those worrying about tariffs — garlic farmer Ken Christopher. Christopher, of Christopher Ranch in Gilroy, said the new tariffs will finally level the playing field for American garlic farmers, who for 25 years have faced tough competition from Chinese garlic growers. Christopher Ranch is the largest family-owned garlic farm, with 1,000 employees. When China entered the American garlic market in 1993, Christopher Ranch was harvesting 100 million pounds of garlic a year. The ranch cut its harvest to 40 million pounds in 1994 because of the new competition. It took Christopher Ranch decades to get back to producing 100 million pounds a year, Christopher said.
Christopher said he is conflicted about the tariffs because on a larger level, he believes a trade war isn’t good for the U.S. But garlic coming into the country from China has decimated the American industry, he said. Christopher Ranch has previously raised concerns about garlic imports that evade existing duties.
“I have to think about my family and our 1,000 employees and our town of Gilroy,” Christopher said.