Cincinnati wine distributor Cutting Edge Selections’ revenue was halved when Ohio restaurants shuttered for three months in 2020 due to the novel coronavirus pandemic. The family-owned business that represents 500 wineries typically gets most of its income from restaurants. By dipping into cash reserves and securing a PPP loan, the company was able to retain its 43 employees, says Chief Operating Officer Eric Faber.
Now, however, Cutting Edge faces a new hazard: tariffs that could double what it pays for European wines.
In October 2019, the U.S. government imposed a 25% tariff on still wine, cheese, olives, whiskey and other food and drink imports from the Britain, France, Spain and Germany. Those 25% tariffs are currently under review and could be expanded next month to include more countries or more types of wines, such as sparkling wines or bottles with more than 14% alcohol-by-volume (abv).
It’s a looming threat for wine professionals, many of whom already feel under siege. The existing tariffs and shaky economy endanger the $70 billion U.S. wine industry that includes importers, retailers, and distributors.
Ben Aneff, president of the U.S. Wine Trade Alliance and managing partner of Tribeca Wine Merchants, urges the wine community to make their voices heard by commenting on the online portal for the Office of the U.S. Trade Representative’s (USTR). Those who oppose the tariffs have until July 26 to submit their comments to the USTR, which will make a decision by August 12.
Ongoing trade disputes could sway the USTR’s decision, too. In addition to the 25% tariffs levied last October from a decades-old Airbus feud, the USTR is investigating whether a tax that Italy, Austria and a host of other countries imposed on digital services unfairly punishes the U.S. Earlier this year, a similar trade dispute nearly resulted in a 100% tariff on French sparkling wines until the U.S. and French governments called a truce.
“Let’s figure out another way to set consequences for these countries instead of taking it out on a bunch of small industries,” says Janeen Jason, certified sommelier and wine buyer for VinoTeca, an Atlanta wine shop that specializes in Spanish and South American wines.
Unless they’re buying wine for a special occasion, most VinoTeca customers like to spend less than $20, says Jason. Hefty tariffs would force the wine store to move away from European wines. “It is very important that we keep wines at a reasonable price so we can stay in business and provide a good that is deemed essential during these times.”
If these new tariffs are enacted, Cutting Edge might have to eliminate European wines from its portfolio entirely, Faber says. Its customers are reeling from the economic turmoil as well, and won’t be able to make up the price differential.
“You know people that are paying $20 for a great bottle of French wine right now aren’t suddenly going to pay $40,” says Faber.