U.S. wine returns to China market

On Monday, May 12, the United States and China announced a temporary and partial suspension of the bilateral tariffs imposed during Donald Trump's presidency. The measure, set to last 90 days, directly affects international wine trade. Under the agreement, China will lower tariffs on selected U.S. products from 125% to 10%, while the United States will reduce tariffs on Chinese goods from 145% to 30%. This decision alters the commercial environment for the global wine industry, which is already strained by low production, stagnant consumption, and a structure shaped by preferential trade deals and tariff disputes between producing regions.

For U.S. wine exporters, the measure presents a narrow window to reenter the Chinese market, from which they were largely excluded after retaliatory tariffs pushed total tax burdens up to 218.91%. The short timeframe complicates strategic planning. American wineries that maintained ties with Chinese distributors may use this period to move existing stock or make isolated sales. However, the limited duration and the likelihood of tariffs returning to previous levels discourage long-term investments in marketing, distribution networks, or new business partnerships.

At the same time, the U.S. tariff reduction on Chinese goods, though still high at 30%, offers partial relief to many American wineries that rely on Chinese inputs such as glass, labels, and machinery. This change could improve profit margins for domestic producers that don't export but manufacture with Chinese components. Some wineries that had cut back on packaging or quality due to cost pressures may now reconsider those decisions.

In the Chinese market, U.S. wines will temporarily become more competitive in price. This shift affects multiple players. Chinese consumers and distributors will have access to a broader range of offerings. Local producers, who have struggled with declining domestic consumption and increasing competition from imports—especially from Australia and Chile—may face renewed pressure. While U.S. wines generally occupy a mid-to-high price range, their return could challenge both domestic brands and foreign exporters who had filled the gap in recent years.

Australia could be significantly impacted by this development. Following China's removal of punitive tariffs in early 2024, Australian wines had regained market access and were showing strong recovery, especially in value. The reentry of U.S. wines, even for just 90 days, introduces direct competition in the premium segment. This could slow the growth of Australian market share and prompt pricing or promotional strategy adjustments.

Chile maintains a more stable position due to its 2015 free trade agreement with China, which eliminates wine tariffs entirely. This advantage remains, but the temporary increase in U.S. wine availability may affect the mid-price segment where Chilean wines compete. In 2024, Chile's wine exports grew significantly, with China as a key destination. Nonetheless, some Chilean exporters may be forced to lower margins to stay competitive during this period.

In Europe, the effects are more indirect. The U.S.-China deal does not alter tariffs between the U.S. and the European Union. However, European producers may see consequences in the Chinese market. France, Italy, and Spain hold strong positions in China, but U.S. wines becoming temporarily more competitive could erode their market share, particularly in the mid- and high-end segments. Meanwhile, the 20% U.S. tariff on European wines remains a major obstacle for exporters to the American market. Thus, the tariff relief extended to China does not benefit European producers, who continue to face unfavorable trade conditions outside the continent.

South Africa is not directly involved in the agreement, but it faces new challenges of its own. The recent U.S. decision to impose a 30% tariff on South African wines, which previously entered duty-free under the AGOA program, threatens a key export market. South Africa exported wine worth 600 million rand to the U.S. in 2024. In response, wineries are rushing to ship orders before the tariffs take full effect and are exploring alternative markets, although China is not currently a primary destination for their exports.

The global wine industry views the temporary tariff suspension as a short-term opportunity, but also a source of risk. The brief duration increases uncertainty, and the possibility of tariffs returning discourages long-term decisions. A new consultation mechanism between the U.S. and China was announced alongside the agreement, signaling a diplomatic step that could lead to more stable arrangements. However, the actual implementation and commitment of both governments to durable solutions remain unclear.

With global wine production at its lowest level in over six decades, according to the OIV, and consumption failing to recover, trade stability is essential for the sector's recovery. Any decision that alters trade flows carries amplified consequences. This temporary tariff suspension adds a new layer of volatility at a time when predictability is what producers and exporters need most to plan harvests, investments, and commercial strategies.