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Treasury Wine (ASX:TWE) share price crashes 11% lower on China tariff news

Two red shipping containers with the word 'Tariff' and Chinese flag
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The Treasury Wine Estates Ltd (ASX: TWE) share price crashed lower on Friday before being hurriedly placed into a trading halt.

The wine company’s shares were down 11% to $9.23 before being halted from trade.

This latest decline means the Treasury Wine share price is now down 43% since the start of the year.

Why is the Treasury Wine share price crashing lower today?

Investors were hitting the sell button in a panic today after the Chinese Ministry of Commerce made a major announcement.

According to the ABC, the Ministry has decided to place tariffs on all Australian wine imports from tomorrow.

This decision was made in response to the preliminary findings of an anti-dumping investigation into Australia’s wine exports. That investigation found that dumping was going on and had caused substantial harm to Chinese winemakers.

Fellow wine company Australian Vintage Limited (ASX: AVG) has also come under pressure following the news. It is down 4% to 60 cents at the time of writing.

What will the damage be?

It is worth noting that the investigation is still ongoing and is not expected to complete until next year. In light of this, there is still a small chance the decision could be reversed upon completion.

However, until then, Treasury Wine and other Australian winemakers will have to face some significant temporary anti-dumping security deposits.

These deposits, which are essentially the same as tariffs, will range from between 107% to more than 200% according to the report.

This could put a real dent into Treasury Wine’s exports into China. In FY 2020 the company generated $243.7 million of earnings from the Asia market, with the majority of this coming from China. This represents almost half of its full year earnings of $533.5 million.

What now?

Treasury Wine has requested a trading halt until the earlier of the release of a response to this announcement or 1 December.

It commented: “Treasury Wine Estates Limited requests a trading halt of its securities pending the preparation and release of an announcement by TWE regarding the decision announced today by the Chinese Ministry of Commerce to apply provisional anti-dumping measures to Australian wine imports into China. TWE is reviewing the details of the provisional measures as a matter of urgency in order to update the market.”

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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