Tariffs

2025 A NEW THREAT OF TARIFFS

As the current administration is set to make an announcement regarding tariffs on April 2nd, 2025, I have been getting a lot of questions about what the tariffs could mean for our business, and for the wine trade in general.  As you can imagine, we have been paying close attention to reporting about the 200% tariffs on European wines that were threatened a few weeks ago.  From what I have seen so far, it seems the majority of the reporting on the tariffs has not clearly articulated how tariffs work, or how they would actually impact importers and consumers.  A substantial amount of the reporting flippantly announces that consumers may be paying more for a bottle of Champagne in the future.  The actual impact, however, is more complicated than simply higher prices.  Just the threat of a 200% tariff has brought the shipment of wines from Europe to a grinding halt.  What many people don’t realize is that importers must pay the tariff upfront, just to have their merchandise released from customs.  So, any amount, even a 25% tariff, is a huge burden, because it turns your cashflow upside-down.  Essentially, paying more than we would make in profit, before we could sell a single bottle, makes doing business a near impossibility.  If these tariffs are enacted, even for a short time, it would put many importers and distributors out of business. 

One of our distributors, for example, currently has two containers of wine that shipped before the tariffs were threatened.  Those containers will land after April 2nd (after the administration plans to make their announcements regarding tariffs).  They cannot turn the containers around.  So, if the 200% tariff is enacted immediately (as it was the last time this happened) our distributor will have to pay over $400,000 just to get the wine out of customs, before they could sell a single bottle.  They would also still owe the standard customs, duties, and shipping costs in addition to the over $200,000 for the wine itself.  There is no way they could recover this loss which could potentially put them out of business.  The immediate impact would be felt by drivers, warehouse workers, salespeople, accountants, etc. who could all be out of a job. 

Since wine shipments can take months to organize and consolidate, importers are justifiably afraid to get caught with wine in transit that could be subject to a tariff, that they could not afford.  For that reason, most importers and distributors are not risking any new shipments until there is clarity regarding tariffs.  Personally, we have halted all shipments from France until there is a clear decision regarding the tariffs.  We have even gone to the extent of pulling a couple of orders off containers, to avoid the risk of tariffs. 

As an industry, the wine business, has gone through a lot, between the first round of tariffs in 2019, and shutdowns during COVID, and higher glass prices in Europe due to the war in Ukraine.  This is all in addition to the usual agricultural worries caused by weather and vintage conditions.  The imposition of new tariffs could decimate this currently fragile industry — the effects of which will ripple through the hospitality and restaurant industries that are facing their own struggles.  I am certain that with everything going on in the world, wine importers are not in the front of everyone’s mind.   However, as the first businesses in line to feel the impact of tariffs, we may be the canary in the coal mine for the rest of the economy. 

I hope that this has given you a little insight into what we are currently experiencing.  We know that there is little that can be said or done to change whatever decision may be forthcoming. However, I feel it is important for all of us to spread the word as much as possible, to help other people understand the actual impact of these tariffs.  We appreciate all of your support, and hope that we are able to continue to share the wines from the small producers that we love with you in the future.

Patrick & Connie

 

TARIFFS 2019 – 2020

Update – (March 2021) The U.S. has agreed to suspend all tariffs on French wines for the next four months.   This is great news for importers, retailers, restaurants, and consumers.  However, it still leaves uncertainty for the market in the long-term.  Nevertheless we are hopeful that these punitive tariffs will be permanently repealed  in the near future.

Update –  The U.S. has postponed the proposed the possible 100% tariffs on all European wines as well as the 100% tariff on French sparkling wine.   They still, however, reserve the right to implement them at any time.   

Unfortunately, the 25% tariff on wines below 14% alcohol from France, Spain, and Germany is still in place.   With restaurants shuttered during this global pandemic, things are already difficult for the wine industry.  Lifting this tariff would be a simple and quick way to help distributors, importers, retailers, and consumers during these difficult times.  

The wine industry is currently dealing with a 25% tariff on French, Spanish, and German wines (under 14% alcohol). That tariff is in retaliation for subsidies given to Airbus by the European community. They are now talking about expanding that tariff to all European wines, and possibly increasing the tariff to 100%.  Depending on how it is implemented, a 100% tariff would make it impossible for us to import French wines at all.  The current 25% tariff was announced just a couple of weeks before it was implemented.  We, like many other importers, had wines that shipped before the tariff was announced, and that landed after it had taken effect.  Since the wine had already left France we couldn’t react and were forced to pay the tariff.   These tariffs are supposed to be a retaliation for Airbus subsidies, but so far they seem to only be hurting American business.    

Apart from the current tariffs, the current administration is now proposing a separate 100% tariff on all French sparkling wines.  This tariff is supposed to be retaliation for a proposed “Digital Service Tax” of 3%.   Though many European countries plan to enact the same tax, France is the first to try to implement it, and has therefore become a target. 

In 2018, the EU was the largest export market for California wines. The EU could retaliate by levying tariffs on US wines, which would be devastating to American wineries.

Summary of the three, separate, but interrelated problems for the wine industry:

1 – Current Airbus/Boeing dispute – October 25% tariff on French, Spanish, and German wines under 14% alc., sold in container of less that 2 liters, (excluding sparkling wines).

2 – In January these tariffs could be expanded to all EU wines, with a tariff of up to 100% on all European wines.  This tariff would also affect handbags, cosmetics, spirits, and a large swath of other European products.  Postponed

3 – 100% tariff on all French sparkling wines – Tariff in retaliation for France’s Digital Services Tax, France signed into law a digital services tax – which is a 3 percent gross receipts tax on receipts from certain digital services sourced to France.  Postponed

If our government does move forward with these tariffs the effects will devastating to American wineries, retailers, distributors, importers, restaurants, and the hospitality industry in general.   Sales of these wines pay the salaries of drivers, warehouse workers, restaurant staff, and a myriad of related jobs.  If you want to learn more, comment, or make your voice heard, please follow the links below: