Why 2020 Is Looking Dangerous for Wine Lovers
Are you a fan of Whispering Angel rosé? Or for that matter, any Provençal rosé? What about Chianti? Or Côtes du Rhône? Do you drink Spanish wines—Rioja, Albariño, Priorat, Cava? Barolo? Barbaresco? How about Prosecco?
Would you like to pay 100 percent more for them in 2020? Or perhaps not even be able to find them for sale at all?
Because that's what we're looking at. On December 12, the current administration proposed a 100-percent tariff on all European wines (as well as European cheeses, olive oils, Scotch and Irish whiskies, and other food products) to take effect in early 2020. This tariff will amplify a punitive 25-percent tariff already in place, and both have to do with an ongoing dispute between the U.S. and Europe regarding aircraft manufacturing subsidies (as well as, confusingly, a dispute about digital revenue taxes in France). Let's leave aside the international politics for the moment and look at the practical effect this will have on both U.S. wine consumers and the U.S. wine business as a whole.
First, you, the wine consumer. There is no possible way for U.S. importers and wholesalers to absorb 100-percent tariffs without raising prices drastically; the $15 bottle of Chianti you like to pour for dinner will become a $30 bottle; the $30 bottle of Champagne you bought for someone's birthday will become a $60 bottle. But you, like most consumers, aren't going to be willing to pay double the price for your wine. The end result will likely be that importers and wholesalers will be forced to stop bringing these wines to the U.S. market; they simply will not be competitive in the market anymore. You might think, well, fine, I'll skip my Chianti and my Rioja and my Bordeaux, and stick to California Cabernet and Chilean Sauvignon Blanc. That's your choice—but there are other costs involved.
The truth is that the primary damage that will be done by this tariff will be to jobs and businesses in the United States. The E.U. exports some €3.8 billion in wine to the U.S., representing over $8 billion in revenue for U.S. companies. European wine producers will certainly be damaged in the short term by this tariff, but the majority of them will rework their export structures to concentrate on other markets, particularly growing ones like China (which through taxes and tariffs currently imposes a 93-percent duty on U.S. wines, thanks to another ongoing trade dispute, a situation which has crippled U.S. wineries' ability to participate in the fastest-growing wine market in the world).
The businesses that won't be able to recover will be U.S.-based importers who concentrate on European wines. These are mostly small, family-owned companies that have built their business over many years in a highly competitive marketplace. Many will go out of business; it's impossible to sustain for any length of time an overnight 100-percent hike in cost of goods.
As Eric Solomon of North Carolina-based European Cellars says, "The brunt of the penalty is going to be borne by Americans like myself, that live here, that work here. We're a small company. I employ twenty or so people, but if you add the other companies like mine, and the sixty distributors I work with nationally, and all the retailers and restaurateurs who buy our wines and other importers' wines, it's massive. We're all in this together—it's like being in a ship that's about to be torpedoed."
Some people will argue that American wineries will be helped by these tariffs. That's unlikely. Almost all U.S. wholesalers—the legally mandated middle tier in the U.S. alcohol distribution system, and a $166 billion business (including liquor and beer)—sell wines from both Europe and the U.S. As Harmon Skurnik of the New York-based distributor Skurnik Wines says, "American wineries need a healthy three-tier distribution system in order to thrive. Putting distributors in peril by removing 50 percent or more of their revenue—most distributors trade in both domestic and imported wines and spirits—will have disastrous effects on American wineries too." (In full disclosure, these tariffs could possibly affect our bottom line as a digital and print publisher as well; European as well as domestic wineries advertise in Food & Wine.)
In the end, wine has nothing to do with disputes in the aerospace or digital sectors except as a useful bargaining chip for trade negotiators. But the potential human cost of being a bargaining chip is very real, as is the potential effect on consumer choice. There's zero reason that you, as a wine consumer, should lose access to many of the greatest wines of the world because of an international dispute regarding Airbus and Boeing. Nor is there any reason that thriving U.S. wine businesses—most of them small and independently owned—should face extinction because of it.
Take a glance through the comments opposing this tariff on the U.S. Trade Representative's site. You'll see that they come from salespeople who are worried their jobs will be impacted, wine store owners who may have to lay off staff, wine importers who are worried that after 20 years in business they'll be forced to close up shop, servers and staff in restaurants that sell European wines—regular people with jobs whose livelihoods will be thrown into question by a draconian penalty in service to a dispute that has nothing to do with their businesses at all.
If you love wine and don't feel like an unrelated trade dispute should restrict your freedom to buy the bottles you love best, or simply find the possible cost to American businesses alarming, you should tell the office of the U.S. Trade Representative, which is required to accept comments from the public until January 13. Contacting your representative would be a good idea, too.
Email your representative here.
Comment at the U.S. Trade Representative's site here.