China is threatening to impose punitive tariffs on European wine exports in a tit-for-tat retaliation for tariffs on solar panels.
Peter Thal Larsen (Reuters - Breaking Views) tweeted that some Europeans would like that.
I would love it.
The Australian wine industry would recover - and get a stronger entry to China than ever before.
And the reduced demand for good French plonk would lower its price - making it cheaper to develop a very refined palate.
Trade wars: bring 'em on.
John
I, for one, would have gone with 'Cheers to that.'
ReplyDeleteI guess you aren't short First Solar any more?
ReplyDeleteYou assume the end buyer of French wine in China is price sensitive. In that particular segment, Chinese consumers have a lot of disposable income and buy for status, so the elasticity to price is probably low.
ReplyDeleteIt's like saying that yay, tariffs on LVMH products, this means that Australian handbag manufacturers can now compete better with them for tai tai share of wallet. Australian consumer brands are not relevant in that segment.
On the other hand the solar industry in S. Europe is already dead so little impact there as well.
So it's all for show on both sides.
Chinese business houses are buying low end Bordeaux Chateaux to have product for their distribution channels. While auctions for First Growths plus Petrus, Ausone, and possibly a couple more make the news the volume is at Bordeaux Superiur price levels where Aussies are competitive particularly with their GSMs. The more significant question is whether the over the top Aussie GSMs will find favor with the Chinese palate or will the Old world terroir regardless of grape produce a winning style.
ReplyDeleteI too would favor harsh penalties particularly for Burgundy, but ( unaccountably) the Chinese have not yet solicited my advice
As someone who has had to pay higher prices for Burgundy year after year(purportedly due in part to rising Chinese demand), I welcome Chinese tariffs on French wine.
ReplyDeleteCategory error. Australia doesn't have the brands to which the cashed up Chinese buyers are attracted. And they're not curious enough, nor sophisticated enough, to explore Antipodean wine - just look at how much counterfeit wine winds up in China, with a lot of it going undetected!
ReplyDeleteAnd trade wars - be careful what you wish for.
Yes, yes I know it's just confirmation bias....
ReplyDeletehttp://blogs.reuters.com/breakingviews/2013/06/07/wine-tariffs-wont-end-chinas-thirst-for-bordeaux/
As long as the third phase as outlined by Kyle Bass doesn't follow a trade war following a currency war is just dandy!!
ReplyDeleteHadn't thought of this, good point. My guess is we're seeing posturing. China raised the stakes a bit with the "big car" threat.
ReplyDeleteOn a related note you may enjoy the documentary "Red Obsession" by Australian film makers Warwick Ross and David Roach: http://www.imdb.com/title/tt2419284/
ReplyDeleteI watched the premiere at the Sydney Film Festival on Tuesday night and it was fantastic.
DH