Treasury Wine Estates share price collapses on 212% tariff hike

Treasury Wine Estates share price falls on duties hike

The Chinese Ministry of Commerce on Friday announced it would slap tariffs of up to 212% on Australian wine imports.

The tariffs on Australian wine, described as ‘preliminary’, are set to come into effect on Saturday, November 28, and will range from 107.1% to 212%.

This announcement comes after China launched anti-dumping investigations into Australian wine imports earlier this year.

The South China Morning Post cited the commerce ministry as saying: ‘there is a causal relationship between dumping and material damage.’

Investors ripped into Treasury Wine Estates in response to this news, with the stock plunging 11.25%, to $9.23 per share. The stock was swiftly put in a trading halt, pending the release of an announcement.

The company noted that 'TWE is reviewing the details of the provisional measures as a matter of urgency in order to update the market.'

In response to this news, Australia’s Minister for Agriculture expressed his extreme disappointment at the planned tariffs, saying:

'The fact is Australia produces amongst the least subsidised product in the world and provides the second lowest level of farm subsidies in the OECD.'

'The Australian Government categorically rejects any allegations that our wine producers are dumping product into China, and we continue to believe there is no basis or any evidence of these claims.'

Looking forward, Mr Littleproud said:

'We will continue to work with our wine industry and Chinese authorities as part of the ongoing dumping investigation, but we will of course consider all of our options moving forward.'

Were these worries really priced in?

Today’s announcement by the Chinese Ministry of Commerce caps off a difficult period for Treasury Wine Estates (TWE).

In early November, the company reported a set of quarterly results which pointed to recovering demand in key markets, but also highlighted double digit declines across EBITS and NPAT. The market looked through that though, bidding the stock higher in response.

That was off a low base though. With the stock down 42% YTD, many were hoping that the headwinds facing the company were already priced in.

Indeed, when UBS, on November 5, raised their rating from Neutral to Buy, Treasury traded at just $7.96 per share, it was argued that the tariff risks were already priced in.

At the time, the investment bank went on to say that ‘we appreciate there are a wide range of outcomes, with near-term catalysts limited as high tariffs look increasingly likely (e.g. Barley ~80.5%, US 93%).’

Such comparisons look conservative relative to today’s news.

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