The Treasury Wine Estates Ltd (ASX: TWE) share price is charging higher on Wednesday.
In morning trade, the wine giant's shares are up 4% to $12.80.
Why is the Treasury Wine share price charging higher?
Investors have been buying the company's shares after it revealed that the Chinese Ministry of Commerce (MOFCOM) has released an interim draft determination relating to tariffs on Australian wine.
As a reminder, back in 2020, the company was hit hard when MOFCOM applied a deposit rate of 169.3% to the imported value of its wine in containers of two litres or less. This effectively shut its luxury wine out of the country.
But these tariffs could now be a thing of the past. According to its announcement, MOFCOM's interim draft determination has outlined a proposed removal of the current tariffs on Australian wine imports into China.
Though, the company warned that the interim draft determination is not a final determination and is subject to change by MOFCOM. Treasury Wine anticipates that the Ministry will release a final determination in the coming weeks.
What impact could this have?
Treasury Wine has a plan in place that it will pursue should the tariffs be removed.
However, given the timing of this development, it only expects an incremental EBITS contribution from the re-establishment of its Australian country of origin portfolio in China in FY 2024.
Broker reaction
Goldman Sachs was pleased with the news. It commented:
Despite a minimal impact to FY24e EBITS, if the import tariffs are indeed removed, we see it as a positive catalyst for TWE as it signals the reopening of a significant, high profit market, where Penfolds still hold strong brand equity.
The Treasury Wine share price is now in positive territory on a 12-month basis.
