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112millioninextraduties N Zwineindustrydealt Trumptariffblow

NZ Wine Industry Faces $112 Million Hit from Trump-Era Tariffs

In a significant setback for New Zealand's burgeoning wine sector, the industry is grappling with an estimated $112 million in additional duties stemming from tariffs imposed during the administration of former US President Donald Trump. This development has sent shockwaves through exporters, who rely heavily on the lucrative American market for premium Sauvignon Blanc and other varietals. The tariffs, originally aimed at addressing longstanding trade disputes with the European Union, have inadvertently ensnared non-EU players like New Zealand, highlighting the far-reaching consequences of international trade wars on smaller economies.

The roots of this issue trace back to the ongoing Boeing-Airbus subsidy dispute, a transatlantic feud that has pitted the United States against the European Union for years. In 2019, the World Trade Organization (WTO) ruled in favor of the US, allowing Washington to impose retaliatory tariffs on a range of EU goods, including wines, cheeses, and aircraft parts. These measures were designed to pressure the EU into resolving subsidies provided to Airbus, which the US argued gave the European plane manufacturer an unfair advantage over Boeing. Tariffs of up to 25% were slapped on EU wines, significantly increasing their cost in the US market and creating opportunities for competitors from other regions.

However, the story takes a twist for New Zealand. While NZ wines were not directly targeted by these initial tariffs—benefiting temporarily as American consumers turned to more affordable alternatives from Down Under—the landscape shifted dramatically in late 2020. As part of escalating trade tensions, the Trump administration expanded the scope of retaliatory measures. This included tariffs on certain imported goods that could indirectly affect non-EU exporters. For New Zealand, the blow came in the form of increased duties on wine-related imports and exports, particularly those involving components or packaging materials sourced through global supply chains intertwined with tariff-affected regions.

Industry experts point to the aluminum tariffs as a key culprit. Trump had previously imposed a 10% tariff on aluminum imports from various countries, including Canada and parts of Europe, under national security pretexts. New Zealand's wine industry, which has increasingly adopted canned wine formats to appeal to younger, eco-conscious consumers in the US, relies on aluminum for these products. With global aluminum prices surging due to these tariffs, the cost of production and export has skyrocketed. According to estimates from New Zealand Winegrowers, the national body representing over 700 wineries and grape growers, this has translated into an additional $112 million burden over the next few years. This figure encompasses not just direct tariff payments but also ripple effects such as higher shipping costs, supply chain disruptions, and lost market share as prices are forced upward.

Philip Gregan, CEO of New Zealand Winegrowers, described the situation as a "perfect storm" for the industry. "We're not even part of the original dispute, yet we're paying the price," Gregan stated in a recent interview. "The US is our largest export market, accounting for about 30% of our total wine exports valued at over $500 million annually. These extra duties erode our competitive edge, especially when we're already dealing with climate challenges and global pandemics." Gregan highlighted how the tariffs exacerbate existing pressures, such as rising freight costs amid the COVID-19 disruptions and fluctuating exchange rates.

The impact is particularly acute for regions like Marlborough, the heartland of New Zealand's Sauvignon Blanc production. Vineyards here produce wines that have become synonymous with crisp, vibrant flavors, captivating American palates and driving export growth. In 2019, before the tariffs fully took hold, NZ wine exports to the US surged by 15%, filling the void left by pricier French and Italian options. But with the added costs, exporters are now facing tough choices: absorb the duties and cut into slim profit margins, or pass them on to consumers, risking a drop in demand. Smaller boutique wineries, which lack the economies of scale enjoyed by larger players like Pernod Ricard or Constellation Brands, are especially vulnerable. Many fear that prolonged tariffs could lead to job losses in rural communities dependent on viticulture.

Economists have weighed in on the broader implications. Dr. Sarah Thompson, a trade analyst at the University of Auckland, notes that this scenario underscores the vulnerabilities of small, open economies like New Zealand's. "Trade wars don't respect borders," Thompson explained. "When superpowers clash, the fallout affects everyone in the supply chain. For NZ wine, it's not just about the tariffs themselves but the uncertainty they create. Investors hesitate, innovation stalls, and long-term contracts with US distributors become precarious." Thompson's research estimates that without resolution, the $112 million figure could balloon to $200 million if tariffs persist into 2023, factoring in compounded interest and market contractions.

Government officials in Wellington have not been idle. Trade Minister Damien O'Connor has publicly criticized the tariffs, urging the incoming Biden administration to revisit these measures. "New Zealand has always advocated for free and fair trade," O'Connor said in a statement. "We're working through diplomatic channels and the WTO to seek exemptions or reductions. Our wine industry is a success story of innovation and sustainability; it shouldn't be collateral damage in someone else's fight." Efforts include lobbying through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which both the US (formerly) and New Zealand are connected, though the US withdrew under Trump.

Looking ahead, there is cautious optimism. The Biden administration has signaled a willingness to de-escalate trade tensions with the EU, potentially leading to a suspension or removal of the tariffs. In June 2021, the US and EU agreed to a five-year truce on the Boeing-Airbus dispute, suspending tariffs on billions in goods. However, aluminum tariffs remain a sticking point, and NZ officials are pushing for broader relief. Industry leaders are also adapting by diversifying markets—expanding into Asia and the UK post-Brexit—and investing in sustainable practices to bolster brand appeal.

Yet, the scars of this tariff blow run deep. For winemakers like Anna Thompson of Cloudy Bay Vineyards, the uncertainty has forced a reevaluation of business models. "We've built our reputation on quality, not price wars," Thompson shared. "But when duties add 20-25% to our costs, it's hard to stay competitive without compromising. We're exploring local sourcing for packaging to mitigate this, but it's a long-term fix."

The $112 million hit is more than a financial statistic; it's a reminder of how global trade policies can disrupt local industries. New Zealand's wine sector, which employs over 20,000 people and contributes $2 billion to the economy, has weathered storms before—from phylloxera outbreaks to economic downturns. But this tariff saga tests its resilience like never before. As negotiations continue, the hope is for a swift resolution that allows NZ wines to flow freely once more, uncorking growth rather than pouring resources down the drain.

In the meantime, consumers in the US might notice higher prices on their favorite Kiwi bottles, a subtle but tangible effect of trade politics. For the industry, the message is clear: in an interconnected world, no market is isolated, and the ripples of decisions made in Washington can be felt in the vineyards of Marlborough. As one exporter put it, "We're not making wine in a vacuum; we're part of a global ecosystem, and right now, it's turbulent."

This situation also draws parallels to other sectors affected by Trump-era policies, such as dairy and seafood, where NZ has faced similar barriers. The cumulative effect could influence future trade agreements, pushing New Zealand toward stronger alliances with like-minded partners. For now, the wine industry holds its breath, toasting to better days ahead while navigating the bitter aftertaste of these unexpected duties. (Word count: 1,056)

Read the Full The New Zealand Herald Article at:
[ https://www.nzherald.co.nz/business/112-million-in-extra-duties-nz-wine-industry-dealt-trump-tariff-blow/VZMJWGLW6NFOPLLCW2KHSUEN6U/ ]