After a period of alarming flat-lining and decline, the wine industry is finally showing signs of strength, vitality and growth. Two storm clouds on the horizon threaten that success though: a second Trump presidency which will likely mean tariffs on European wines, and the threat of tariffs on European wine imports from China.
Depending upon what polls and prognosticators you turn to, either Trump is set to win, or Biden is. And while nothing formal has been declared, there have been mutterings – most notably from the China Chamber of Commerce to the EU – threatening “countermeasures” and punitive tariffs against EU wines and other goods if the European Commission continues to probe Chinese state subsidies.
Why is this such bad news for winemakers – and the jobs and industries they support, not to mention thirsty consumers – everywhere?
Let’s review
Generally speaking, tariffs are essentially excise taxes on goods. While nominally intended to increase consumption of goods made in the country issuing the tariffs, in the long run, tariffs hike prices, reduce the availability of goods, and lower GDP, wages and employment over time.
After World War II, protectionist tariffs were nixed in favor of open trading systems, which, many economists believe, ultimately led to higher incomes, lower prices and better choices for consumers. In recent years, that trend toward global trade has turned.
During Trump’s first administration, nearly $380 billion worth of tariffs were levied against a range of products, including wine. Erica York, a senior economist and research director at the Washington DC-based think tank The Tax Foundation, estimates that this ultimately amounted to $80 billion in taxes on Americans, and a long-run GDP reduction of 0.21 percent, and a reduction in wages of 0.14 percent.
If re-elected, Trump has pledged a 10 percent tariff across the board on all imports, and 60 percent on Chinese goods.
In August of 2023, Trump said, “When companies come in and they dump their products in the United States, they should pay automatically, let’s say a 10 percent tax … I do like the 10 percent for everybody.”
“Let’s say”
TBD how that will shake out in reality, but one analysis of the “let’s say” levy from the admittedly left-leaning Center for American Progress Action Fund found that the one-size-fits-all tariff would amount to a $1500 annual increase for a typical household. In other words, as with other tariffs historically, it would drive up the cost of everything, without boosting anyone’s bottom line.
This tariff 2.0 would be less severe than the first iteration for certain regions. In October of 2019, Trump slapped wines from Germany, France, Spain and the UK with a 25 percent tariff, a tax that remained in place for 15 months. During that period, French wine exports to the US were down 20 percent in value (which meant a 14 percent drop in French wine exports overall because the US is such a key market), German wine exports plummeted 30 percent and Spanish exports deflated 12 percent.
The most notable effect for US businesses was in the restaurant industry, which was still reeling from closures during the pandemic.
Meanwhile, if China imposes tariffs on European wines, they have the cautionary tale of not just Trump, but China’s tariffs on Australian wine to turn to.
Currently, European wineries export about $800 million worth of wine to China.
In 2021, China hit Australia with tariffs that amounted in some cases to 218 percent, essentially halting sales. The tariffs were finally lifted in March of 2024, but the impact on the wine trade in Australia would be difficult to overestimate. By the end of the year, exports of Australian wine to China were down 97 percent; by 2023, sales of Australian wine went from the high of A$1.24 billion 2019 to A$1 million.
No comment
Trump and his supporters and Chinese President Xi Jingping are both notorious grudge-holders, so it should have come as no surprise that it was impossible to get almost anyone on the record on how they plan to contend with or plan for either potential crisis.
As one press handler at a prominent importer explained, commenting on anything in relation to Trump “doesn’t seem like it would be in the best interest of” anyone.
Fair enough. Picking a fight with a powerful bully – unless you’re Marty McFly driving a DeLorean equipped with a flux capacitor and Mr. Fusion chamber – is generally unwise.
Martina Mirandola Mullen, Italian brand manager and national sales manager at Massanois Imports declined to speculate about future tariffs, but did reflect on the impact that they had in the past.
“It was a terrible time,” Mullen recalls. “We’d just onboarded Mirabeau and we had to eat the margins. While the tariffs were positioned as being good for American producers, because they’d make them more affordable in comparison, it doesn’t translate to the world of fine wine.”
A Napa Cabernet Sauvignon is not the same as a French Bordeaux, Mullen notes.
“The tariffs made it really hard for restaurants and retailers,” she says. “And the current situation for European winemakers is really challenging. Costs for everything have gone up, from electricity, to bottles, to labels. We’re on the tail end of three years of price increases on European wine, they can’t go up any more, but with tariffs?”
Mullen doesn’t answer the rhetorical question.
“The US is the most important market for most producers, but it feels increasingly difficult,” Mullen says. “It’s oversaturated and competitive. To be successful you have to be priced right and have the right story and wine.”
It’s a delicate time of recovery for the wine industry, which has been through a century’s worth of upheaval in the past five years.
With painful lessons in the rearview, many members of the industry, from producers to retailers to importers – wherever they’re based, because tariffs have a negative effect universally – are probably already stocking up, planning ahead and exploring new markets.
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