Would you pay $2,500 for a bottle of Penfolds Grange? Me neither.
Australia's Treasury Wines is one of the world's largest wine companies famous for its $950 Penfolds Grange. The biz is worth around $9 billion, and it makes and distributes wines to around 100 countries. We sure know our wines.
Australian wine companies used to export around $1.3 billion of wine to China. Treasury Wines' exports accounted for a HUGE $500 million worth.
It was a pretty profitable venture, until China imposed a 175.6% tariff on wine exports. But despite that, Treasury's profits grew 1.8% to $250 million thanks to their new e-commerce platform.
Tariffs are taxes that a country puts on imported goods. There are fixed charge tariffs (i.e. $100 per tonne of imported steel) and 'ad valorem' tariffs (i.e. 20% tax on imported cars).
Countries normally impose tariffs if they want their peeps to start buying local. Buuut they can also use them as a political ploy by governments when they want to make a point. Remember when Trump introduced billions of dollars in tariffs on Chinese imports?
These tariffs have basically made the Chinese market a no-no for Australian wine exporters. Think about it. If a bottle of Grange costs $950 here, a 175% tariff would cost $2,500 in China.
Sign up for Flux and join 100,000 members of the Flux family