On December 30, the Trump administration announced it would add a 25% tariff to certain European wines. It’s an extension of the tariffs the government originally levied in 2019 and came after the European Union (E.U.) announced it would tax some U.S. goods in an escalating trade war.
In October 2019, the United States Trade Representative (USTR) levied 25% tariffs on all still wines under 14% alcohol by volume (abv) from France, Germany, Spain and England. Those tariffs will now be extended to still wines above 14% abv from France and Germany. Wines in certain larger packages will also be tariffed, as will specific spirits.
“It’s not even like kicking someone when they’re down. It’s like cutting off their limbs and then saying ‘If you want to survive, you can walk out of here.’”—Erik Segelbaum, Somlyay
The tariffs were initially imposed in retaliation to E.U. subsidies of aerospace giant Airbus, a dispute that dates back to 2004. A World Trade Organization (WTO) ruling in 2019 permitted the U.S. to levy tariffs up to $7.5 billion on E.U. goods, which were imposed shortly thereafter.
However, last November, the WTO ruled that the U.S. had similarly subsidized its own airline industry, allowing the E.U. to impose $4 billion in tariffs. That then led to the most recent round of retaliatory tariffs the U.S. issued late last month.
What does an international trade war over aerospace industry subsidies have to do with the U.S. wine industry? Nothing at all, wine professionals say, except they are the ones stuck paying the bill.
Importers pay the tariffs and subsequently pass them on to local distributors, retailers and, ultimately, consumers. Tariffs on European wines are particularly impactful to U.S. businesses.
“Distributors keep the lights on with their European portfolios,” says Erik Segelbaum, founder of Somlyay, a Washington, D.C.-based wine service and hospitality consulting company. For businesses already struggling due to the effects of the novel coronavirus pandemic, they now have additional tariffs to contend with, too.
“This is decimating to them while they’re struggling to exist,” he says. “It’s not even like kicking someone when they’re down. It’s like cutting off their limbs and then saying ‘If you want to survive, you can walk out of here.’ ”
“It’s a kick in the teeth.”—Harry Root, Grassroots Wine
For restaurants already reeling from the novel coronavirus pandemic, it deals yet another blow.
“This is the most devastated industry in the United States,” says Root. “For this industry to have their own government levying optional tariffs in an unrelated trade dispute is not just reckless financially, it’s disheartening.”
The new tariffs go into effect January 12. This means U.S. importers with in-progress wine orders will have to pay additional tens to hundreds of thousands of dollars in unexpected tariffs if they want to receive their shipments.
“It looks to be like we’ll probably incur about $43,000 in additional tariffs,” says Steve Graf, co-founder and VP of sales at Valkyrie Selections, which has three containers currently en route. “When you layer in the pandemic and the restaurants [struggling] and everything else, it’s a real tough time for small, family importers and distributors.”
While there is hope the incoming administration might take a new approach, changes could take time. The tariffs are reviewed every 180 days, but the appointment of a new USTR would require congressional approval, itself a lengthy process. Still, there is at least the possibility help could eventually be on the way.
“The new administration could, with a wave of Biden’s pen, at least get some instant relief not only to our industry but to the hospitality industry and hundreds of thousands of people throughout the country,” says Graf.