**California**: President Trump’s proposed 200% tariff on imported European wine has ignited apprehension among Californian winemakers. While some view it as an opportunity for U.S. wines, many others fear it could damage an already struggling industry facing declining demand and potential retaliatory measures from the EU.
Last week, President Donald Trump announced a dramatic proposal to impose a substantial 200% tariff on all wine, Champagne, and other alcoholic beverages imported from the European Union (EU). In a post on social media, he stated, “This will be great for the Wine and Champagne businesses in the U.S.” This alarming declaration has sparked a mix of anticipation and concern among winemakers and grape growers in California, which is responsible for a significant majority of wine production in the United States.
Many within the Californian wine industry express unease over the proposal, asserting that while there may be potential benefits, the risks could be detrimental to an already fragile sector. Notably, John Williams, the founder of Frog’s Leap winery located in Napa Valley, commented, “Even though we’re a farming family business, there’s a global link. This is not good for our industry in general.” The wine industry in the state is grappling with declining demand due to shifting consumer habits and the damaging effects of recent wildfires and drought conditions.
Alcoholic beverages represent one of the EU’s most significant export categories to the United States, according to data from the European Commission. The implementation of high tariffs is expected to elevate prices for consumers, meaning that American patrons could face increased costs when ordering wine at restaurants or purchasing bottles from local retail outlets.
Trump’s tariff proposal signals an escalation in the ongoing trade tensions between the U.S. and the EU, which has already seen the introduction of a 25% tariff on all steel and aluminium imports from the EU. In retaliation, the EU is set to implement countermeasures, including a 50% tariff on American whiskey, which will take effect in April.
Williams expressed concerns over the potential impact of retaliatory tariffs on distributors, the crucial entities that connect producers with retailers and restaurants. He noted, “We all rely on the same distributors. The health of those businesses is important to wineries all over the world.” His winery also exports products to Canada, another country facing trade friction with the U.S., which has led to some retailers removing American alcohols from their shelves.
The decline in wine demand is particularly pronounced as the Baby Boomer generation ages, opening the market to younger consumers who generally favour lower alcohol options. A report by Silicon Valley Bank predicts that total wine sales could witness a negative volume growth ranging from minus 3% to minus 1% in 2024, further complicating matters for smaller, family-owned wineries.
John Duarte, a former Republican Congressman who currently oversees a family farm and grape nursery, pointed out that larger corporations in the alcohol sector might benefit more from these tariffs than smaller operations. He explained that U.S. Customs and Border Protection offers refunds on certain duties for companies that import and export similar items. This structure could inadvertently incentivise large alcohol firms to import European wines at higher tariffs in order to benefit from potential refunds when exporting their own products.
While Duarte acknowledged the need to address perceived unfair trade practices between the U.S. and the EU, he stressed that tariffs should be approached with caution, saying, “This 200% tariff on top of other excise and tariffs that are in place already is a giant advantage to the global wine companies that do importing and exporting from the United States.”
Not all producers share a uniformly negative outlook on the proposed tariffs. Bruce Lundquist, co-founder of Rack & Riddle, which stands as the largest sparkling wine producer in the U.S., conveyed a more optimistic perspective. He suggested that the tariffs could indeed foster interest in domestic sparkling wines. However, he also recognised the potential negative impact on the market for Champagne, which is currently imported from France, stating, “A 200% tariff on Champagne imports — and the price hike that would likely go along with it — would be a ‘devastating blow’ to that market.” Lundquist added, “Nobody wants a trade war. I don’t know if that’s in anybody’s best interest,” while expressing hope that American consumers would turn their attention to locally produced wines.
As the wine industry watches closely, the administration’s tariff proposal highlights the complexities and challenges of global trade dynamics, particularly in relation to the evolving tastes and preferences of consumers.
Source: Noah Wire Services
Subscribe to Industry Updates
