Treasury Wine Estates Ltd (ASX: TWE) shares finished last week with three consecutive days of gains.
But shares in the S&P/ASX 200 Index (ASX: XJO) global wine company are in the red on Monday.
In late afternoon trade, Treasury Wine shares are down 0.5% at $11.99 apiece.
For some context, the ASX 200 is down 0.3% at this same time.
The strong finish to last week and the weak start on Monday could well be linked to the changing narrative on China's punitive tariffs on Australian wine exports.
What's going on with China's wine tariffs?
As you're likely aware, Treasury Wine shares took a big hit when China imposed tariffs on a range of Australian exports in 2021, including wine. Those were implemented after the Aussie government called for an international investigation into the origins of COVID-19.
In the run-up to those tariffs, China had been Australia's top wine export market.
Investors look to have been bidding up the ASX 200 wine retailer late last week after news emerged on Thursday that China was open to a "packaged solution" to work towards eliminating those tariffs.
Indeed, Treasury Wine shares closed up 2.6% on Friday, a day that saw the ASX 200 close flat.
Addressing the press on Thursday, China's commerce ministry spokesman He Yadong said, "We are ready to work with the Australian side to enhance mutual trust and cooperation based on settling the barley dispute."
China axed its barley tariffs on 5 August.
Yadong continued:
The two countries shall fully accommodate each other's concerns and promote a packaged solution for the wine case and the anti-dumping and countervailing measures imposed by Australia on imports of wind towers, railway wheels, and stainless-steel sinks from China.
Over the weekend, however, it emerged that Australia's government isn't willing to lump the various trade issues together, which could be pressuring Treasury Wine shares today.
On Sunday, agriculture minister Murray Watt said (quoted by Bloomberg), "We see these as entirely separate matters."
According to Watt:
We will continue our WTO [World Trade Organization] case when it comes to wine, and we will continue to defend the case when it comes to steel. But we hope that all these things can be resolved by dialogue…
We have been able to stabilise our relationship with China and that is paying dividends for our farmers in areas like barley, horticulture, cotton and others. Wine remains an issue that we want to see resolved.
How have Treasury Wine shares been tracking?
Treasury Wine shares remain up 3.4% over the past five trading days, with investors potentially hopeful that the Chinese wine tariffs will get rolled back this year.
Over the past 12 months, shares in the ASX 200 wine retailer are down 4.6%.
