Treasury Need Not Whine About Chinese Wine Tariffs

China appears unlikely to back down from 176% tariffs imposed on Australian country-of-origin wine. In a Chinese Foreign Ministry press conference on June 22, 2022, spokesperson Wang Wenbin declared the sanctions as "legitimate, lawful and beyond reproach". While this means Treasury Wine Estates' door to the lucrative Chinese market remains effectively shut, it's business as usual for Treasury, and we retain our AUD 11.50 fair value estimate. Treasury's strategy already assumes the tariffs on Australian wine are permanent, and instead aims to supply the market with French and American made wine (which do not attract the tariffs), and eventually Chinese-made Penfolds. At current prices, Treasury screens roughly fairly valued.