A tariff is applied on the product and borne by Chinese residents, it's not a direct cut out of TWE's margin.
Chinese consumers have to pay more for the good (i.e. bottle price + Chinese government tariff). This results in less of TWE's wine being purchased because of the price and substitution effect.
Increasing the price of TWE wine will only exacerbate this problem. The solution would be to decrease the price / margin to maintain volume sales. Impossible to do when the tariff is that large. TWE are also concerned about brand image, therefore don't want to sell Penfolds for pennies.
What is TWE Worth Ex-China?, page-242
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