The Treasury Wine Estates Ltd (ASX: TWE) share price is up 1.77% to $14.40 amid news that China may shift its position on tariffs for Australian wine imports.
According to reporting in The Australian, a Chinese ministry official has indicated they may be willing to move on the tariffs.
Is China about to lift its wine tariffs?
At a briefing in China, the commerce spokeswoman Shu Jueting was asked a question about Australian wine tariffs.
She reportedly said: "China is willing to communicate on some technical issues in bilateral trade which are of concern to both sides."
China imposed tariffs of up to 212% on Australian wine imports in 2020. This occurred as relations soured with the Australian Government.
ASX wine shares were hit hard because the tariffs effectively rendered one of our biggest export markets redundant.
Government data shows the Chinese market was worth $1.1 billion at its peak in 2019-20. It represented 37% of Australia's total wine exports at the time.
Today, Austrade says 60% of Australian wine is exported and we are the world's fifth largest wine exporter.
We have more than 6,000 grape growers and 2,000 wineries. About 1,000 producers export their wine to more than 100 international locations.
How the tariffs killed the Treasury Wine share price
The Chinese market was crucial to Treasury Wine prior to the tariffs being imposed in November 2020.
The Treasury Wine share price crashed to $7.87 per share on 5 November after news of the tariffs broke. Just three months earlier, it had been trading 26% higher.
More than two years down the road, Treasury Wine has found other markets for its Australian products. If China were to reopen as an export destination, it would give Treasury Wine an enormous 'new' market.
The Treasury Wine share price hit a 52-week high of $14.84 on 1 February. This was driven by hopes Australia and China may rekindle their trade relationship.
At a GSFM briefing on 24 January, Tribeca portfolio manager Jun Bei Liu said even just a reduction in tariffs would create "an earnings upgrade of between 15% to 20% for [Treasury Wine]".
She said the Treasury Wine share price (trading at a high of $14.44 that day) "hasn't really reflected that yet".
