Wine Tariffs May Further Impact Small Wine Businesses In 2020, But Consumers Can Weigh In

Scott Ades is the president of Dalla Terra Winery Direct, an importer for small, family-owned Italian wineries. Andes and his team perform a rather behind-the-scenes function for consumers, serving as a facilitator to move wines direct from Italian producers such as Alois Lageder, Vietti, Aia Vecchia, Cleto Chiarli and more to distributors in the United States.

As the threat of tariffs on certain wines looms, Andes and others in the industry fear that many wineries and connected U.S. businesses will be unable to sustain the cost impact, and that consumers will face a reduction in choices on the wine shelf, in addition to higher price tags.

The Cost of Imported Wine

Many consumers don’t realize that the path from an international winery to their home is filled with professionals, each nudging the product over borders and across states, tending to a hefty regulatory environment like almost no other business in the world.

There are costs all along this path, rightfully so, and these professionals earn a living from their share of effort. While consumers are finding more options for direct-to-consumer purchasing from their home country, it’s much less likely for U.S. consumers to buy European wine head-on from the source.

“Imported wines already come into the market at a potential cost disadvantage to domestic wine, due to the transportation costs to get the wine to the U.S., which are significant,” says Andes. “They also need an importer, which has a cost as well. As a result, there is not a lot of margin in most imported wine.”

Why Tariffs?

Tariffs made big news in the wine press this year. In case you missed it, here’s the short version. In matters of trade, the U.S. government investigates the actions of other governments, and if something seems discriminatory against the U.S., penalties such as tariffs could be put in place.

For example: wines from France, Germany and Spain (under 14% alcohol) currently encounter 25% tariffs. This is tied to a dispute over European subsidies to Airbus, which were determined to be illegal by the World Trade Organization because they put the American aerospace industry at a disadvantage. Due to this ruling, the U.S. is entitled to place tariffs on “certain European Union goods,” including the wines mentioned above and other products. The European perspective is that the U.S. has allowed Boeing preferential treatment. It’s a decades-long dispute, with wine in the quicksand.

Adam Sager is co-president of Winesellers, Ltd, an Illinois-based importer and to the U.S. market. He says that his clients abroad are “very worried” especially with the one-two punch of COVID-19 and tariffs. “We are members of the National Association of Beverage Importers (NABI) and we’ve heard that the E.U. is pushing the WTO to have a decision on the Airbus/Boeing dispute by the end of July. Retaliatory tariffs would happen immediately if a decision is made in Airbus’s favor.”

This may leave you wondering, what does Airbus have to do with wine? If that seems incongruent to you, many in the wine industry would agree. In fact, earlier this year the office of the United States Trade Representative opened a comment portal to consider increasing, decreasing or retaining the tariff arrangement. More than 25,000 comments poured in, and the USTR settled on keeping them the same.

Tariffs and Consumers

The next review is set for later this summer, and that process will again include a public comment portal which will address the goods currently impacted by the Airbus tariffs plus other items including wines from Italy and additional products from Europe.

Ben Aneff is the president of U.S. Wine Trade Alliance and managing partner of Tribeca Wine Merchants in New York City. He says that comments from the public and the wine industry continue to inform the legislature on how tariffs on wine impact consumers in every community. “When you walk in to buy a bottle of wine in your hometown, you are walking into a U.S.-owned business, probably a small business,” says Aneff. “The shop probably got the wine from U.S. distributor, and most of these are small and family-owned.”

Aneff explains that the damage is shifted away from official targets in the E.U. and instead lands on small businesses, such as Dalla Terra Winery Direct and Winesellers LTD, as well as other importers, distributors wine shops and restaurants. “It’s lose, lose, lose, lose,” says Aneff. “Right down the line.”

If tariffs impact price to the degree that importers and distributors can’t represent them, then wine shops and restaurants are less likely to offer the range of choice that U.S. consumers have come to enjoy.

Ades says this is already happening: “Ask any importer of wines that are currently tariffed and they will absolutely confirm they have reduced the number of wines they import.”

Turning to domestic wines is an option, but even these brands rely on distributors, often the same businesses that deliver international wines. If these businesses are struggling, they are less likely to take a chance on a new, small or unknown brand.

“Tariffs may impact the country of origin, but they also have a real impact on Americans: from a jobs perspective, from a consumption perspective, from a life perspective,” says Ades. “They hurt American businesses and reduce jobs and income, which is why American wineries universally oppose these tariffs as well. It weakens their customers and their distributors.”

What can consumers to to influence this situation? Sager offers this advice: “Write to your congressmen and congresswomen. Fill out the questionnaires on the USTR site. Support your restaurants. Drink imported wines! Post displeasure on Facebook. Tweet your opinions and tag congressmen, senators, government officials, the president, etc…”

Note: The docket entitled “Comments Concerning the Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute” will is open on the USTR comment portal as of June 26, 2020. Read comments and submit a comment here.

Meanwhile, a separate tariff relating to digital service taxes is being investigated by the USTR in this multi-dimensional landscape, so more to come on that.