According to the most recent Vinexpo/IWSR wine and spirits report, the world is expected to consume US $207 billion by the year 2022, drinking approximately 2.7 billion 9-liter cases. That represents growth in the industry of 2.15% between the years 2017 and 2022. Due to the recent practice to “drink less but better,” value has out-paced volume in growth all over the world. This is especially true in North, South and Central America as well as in the Asia-Pacific region.
The United States is still the world’s most valuable market for wine with a value of US$34.8 billion in 2017. After the US France is rated the second most lucrative market worth about US$16 billion. China comes in at a close third with US$ 16.5 billion in sales.
Vinepress forecasts the China will overtake France as the second largest consumer of wine by the year 2020, with a value of over US$19 billion.
The top five markets for volume of sales did not seem to change in the last year with • USA sold 318 million cases • Italy sold 266 million • France sold 250 million • Germany 224 million • China 156 million
North American businessmen have long been aware that traveling to China had its risks: executives with cellphones and laptops feared the theft of intellectual property and cyber attacks when in the biggest of all Asian nations.
But now the level of fear has been notched up to the next level.
Ever since the arrest of Meng Wanzhou on December 1st, traveling to China for business people hailing from the West, and especially North America, has been a nail-biting experience. Wanzhou, the head of giant cellphone maker Huawei, was arrested in Canada and her extradition was requested by the USA. She is charged with fraud because her company has allegedly had business dealings with Iran, a violation of US sanctions against the middle eastern country. Then the atmosphere intensified when Chinese officials stopped two Canadians, saying the pair was suspected of national security violations.
It is supposed by observers that the self-destructive mutual suspicions will not spiral out of control since neither side has any interest in provoking the people they want to do business with, and therefore will not publicly change their travel policies.
Unfortunately, sometimes mistakes are made. Last week the US tech company Cisco sent an email to their employees telling them that all non-essential trips to China would be suspended. The company caught the mistake and issued an apology stating that their travel policy to China had not changed.
American diplomats and businessmen will say in private that the two Canadians being held in China now is in retaliation for Meng’s detention, according to Craig Allen, the president of the US-China Business Council.
“If we don’t recognize that as a possible signal to American interests and to American businesses, then we would be willfully blind,” he says.
In an unusual and controversial move, the Canadian government detained Meng Wanzhou, chief financial officer to electronics giant Huawei. The arrest took place as Meng was changing planes on December 1st, in Vancouver, at the request of the United States.
Washington is requesting the extradition of Meng so she can face charges of Huawei using a shell company to sell electronic equipment to Iran, against the terms set forth by the US sanctions against Iran. The US also alleges that Huawei, under Meng’s leadership, misled American banks about the business it conducts with Iran.
The Chinese government called the US ambassador to Beijing to register its anger over the detention, insisting that Canada release Weng and the US cancel the order for her arrest. The official Chinese news agency Xinhua News Agency said that Vice Foreign Minister Le Yucheng “lodged solemn representations and strong protests” with Ambassador Terry Branstad. The Chinese government also summoned the Canadian Ambassador John McCallum, telling him that there would be “grave consequences” if Meng is not released. One of Canada’s provinces, British Columbia, said it was cancelling a trade mission
scheduled to visit China due to the detention of Meng. There is a fear that the Chinese will retaliate against Canada and arrest Canadians in kind.
The major indicators did not falter the day after President Trump announced he was raising the threatened tariffs on China from 10% to 25% on $200 billion worth of products. The NASDAQ composite, the Dow Jones Industrial Average and the S&P 500 were all higher by a bit following the announcement.
The consensus among analysts is that US business will survive the latest signs of a coming trade war as well as they have previous similar threats from the president and from reactions from abroad.
In an interview Randy Frederick, vice president of trading and derivatives at Charles Schwab& Co. Inc said,
“The economy generally is so strong that, despite the challenges of the potential trade war, the strength of the economy is more than offsetting that. Corporations have posted record profits this quarter that we haven’t seen in over a decade.”
There have been warnings, however, from companies such as Coca Cola, General Motors, Caterpillar, Ford and Harley Davidson that the tariffs of 25% already imposed on steel and 10% on aluminum; and previous tariffs on $34 billion of Chinese goods, will have negative consequences on 2018 earnings, and further into the future. Retaliatory tariffs have already been imposed by China and US allies like the European Union, Mexico and Canada. There are also many smaller businesses that have suffered from the tariff policy.
Not everyone is suffering. Many companies have seen higher profits during Q2. Apple’s sales in China flew to 19 percent from March to June. Caesars Entertainment Corp showed an 89.3% increase in profits to $282 million. And even though Caterpillar predicted higher prices, the company’s net income rose 112% during Q2 to $1.7 billion.
These data points are not indicative of anything, since the tariffs will not be imposed until September at the earliest, and their effect will not be manifest until months later. US Business is still fearful of what tariffs will do to their bottom lines:
“We said before that this round of tariffs amounted to doubling down on the recklessness of imposing trade policy that will hurt U.S. families and workers more than they will hurt China. Increasing the size of the tariffs is merely increasing the harm that will be done,” National Retail Federation CEO Matthew Shay said in a statement. “Quite simply, there has been no better example of cutting off one’s nose in order to spite the face.”
The world economy has been booming. Bloomberg says the world economy is approaching its best year since 2011.
On the other hand, there are always things that can go wrong. Here are a few possible events that could put the brakes on continued, unencumbered growth.
Though all-out war seems unlikely, other tension can exert serious negative pressure on world economy, mostly because South Korea makes up 2% of the entire world’s gross domestic product.
Rapidly rising debt and slow economic growth forced credit rating agencies to downgrade China as an investment opportunity, for the first time in 30 years. The country did announce economic reforms for the coming year, but analysts feel that if the reforms come too late, there could be serious de-stabilization in the Chinese economy.
Donald Trump’s “America First” policies could backfire and cause our biggest trade partners, especially China to retaliate with some “protectionism” of their own. This could then lead to an unpredictable global business climate and unstable operating costs.
The uncertainty caused by President Trump’s threat to pull out of the North American Trade Agreement, which has been operational since 1994, could disrupt markets, reduce credit growth, and have many other dire consequences to our best trading partners, Mexico and Canada.
The EU had more economic growth in 2017 than the US, but that is not a guarantee that such a state of affairs will continue. The rise of the far-right in the East, Brexit, immigrants and more can all lead to destabilization and uncertainty in the Eurozone marketplace.