Impacts of Tariffs and Trade Agreements on Japanese Wine Imports by Source

In recent years, the Japanese bottled wine market (HS classification: 220421) has steadily grown due to an increase in consumption, with the majority of demand being satisfied by imports. Recent trade negotiations with Japan have resulted in the full elimination of tariffs on wine from countries in the European Union (EU) and Chile and the eventual elimination of tariffs on wine from Australia. On October 16, 2018 President Trump announced plans to negotiate the United States-Japan Trade Agreement. The agreement was signed in October of 2019, and a new tariff rate of 8.5 percent on US wine became effective in January of 2020. While the new tariff is lower than the previous 15 percent, the tariff significantly increases the cost of US wine in Japan. The generalized dynamic Rotterdam model will be used to estimate Japanese wine demand differentiated by exporting source (e.g., France, US, etc.). Expected results include an assessment of habit formation and the derivation of long-run expenditure and price elasticities of demand by source. Price elasticities are used to project the impact of the United States-Japan Trade Agreement as well as the trade agreements between Japan and the EU, Japan and Australia, and Japan and Chile.