The Dreaded Wine Tariffs Are Suspended. Now What?
On Friday, the European Union and the United States announced a four-month suspension on tariffs stemming from the World Trade Organization (WTO) Aircraft disputes between Boeing and Airbus. It's welcome news for many folks, especially wine importers, distributors, and retailers in the U.S. who have been bearing the brunt of the taxes.
Back in October of 2019, the Trump administration levied a 25 percent tax on many wines (and other delicious things) from Germany, France, Spain, and the United Kingdom, a decision that was followed by further hand-wringing over a potential additional tax of up to 100 percent on goods like Champagne and French cheese. Even though the latter didn't come to fruition, the 25 percent tariff from last October through March of this year—roughly 15 months—has impacted virtually everyone who has touched a bottle of European wine in the United States.
"A small business like ours has absolutely no place in the middle of an international dispute between large aircraft companies," says Ben Aneff, president of the United States Wine Trade Alliance and owner of Tribeca Wine Merchants. For Aneff, the four-month suspension is cause for celebration and hope, not just for his industry, but for the democratic process overall. "Every person at the USTR [the office of the United States Trade Representative] is fully aware of the massive outcry from U.S. consumers, and that made a huge impact," he says. "The USTR received what we understand are record-breaking submissions to their comment portal asking for the repeal of these tariffs, with 25,624 submissions received through the January 2020 comment portal, and 30,367 submissions received in July 2020. The vast majority were asking for repeal of the tariffs on food and wine." The numbers are extraordinary, given that the USTR typically sees hundreds of comments every month.
Aneff says that regular patrons at his shop were absolutely aware of the tariffs, chiefly because they applied to everyday wines like Cote du Rhone, Sancerre, Red Burgundy, and German Riesling. Harry Root, president of Grassroots Wine, an importer based in Charleston, South Carolina, estimates that because of the way in which tariffs are levied—importers and distributors have to pay 100 percent of the tariff the day the product enters the U.S.—a tremendous amount of capital ends up coming into play before a single bottle is sold. As a result, Root estimates that roughly 12 percent of his company's working capital has, for the past 15 months or so, been tied up in tariff costs alone.
The tariffs also made selling wine less profitable at restaurants, as if the hospitality industry needed more challenges in the midst of a global pandemic that has led to thousands of places shuttering. "The tariffs make restaurants less profitable… they really are harming the most vulnerable industries in the pandemic world that we live in. Their suspension is common sense, and is hopefully the first step towards a long-term solution," Root says.
But before you rush out and stock up on all the Burgundy your heart can handle, it's important to know that it's unlikely this will immediately affect prices at store or restaurants. Most wine currently on the market in the United States has already been hit by tariffs, meaning importers still need to recuperate those costs. Furthermore, the United States Wine Alliance is lobbying to have the tariffs for what was "on the water" refunded to importers. This means wine that was already purchased and in transit before the 25 percent tax was announced. And of course, restaurants are still hurting from all of the pandemic-related financial hardship they've had to shoulder, meaning it's unlikely that serious wine list price reductions are top of mind at the moment.
"This is an incredibly complicated case that impacts a huge number of people around the world… but we're going to push both sides to ensure a final settlement of the case comes to a fruition quickly," Aneff says. "It's incredibly heartening that the Biden administration heard the voices of so many American businesses around the country and got an understanding of the incredible damage these tariffs were causing. … It's rare in this day and age that your voice is heard, but without a doubt, in this case, it was."