In an era fraught with trials for the wine industry, the implications of tariffs are especially significant. Breaking away from tradition, President Donald Trump, in his firm grasp on international commerce, applied a 25% tariff on non-sparkling wines from France, Germany, Spain, and the UK in 2019. Wendy Lamer, owner of Disco Ranch, a charming small wine outlet in Anderson Valley known for its choicest imports and quaint local labels, exhibited her business prowess by preparing well in advance. Before the tariffs became operational, she wisely secured approximately 100 cases of splendid value, primarily French wine, to shield herself from the escalating costs of European business transactions.
In 2021, President Biden’s withdrawal of these tariffs on European wines was met with a sigh of relief from Lamer. However, the following November, when speculation swirled that Trump, in his first move back in office, would potentially establish new tariffs on imports from China, Mexico, and Canada, Lamer geared herself up for the coming challenges. She was candid about the difficulties she has been facing, “Business is painfully slow at present, hardly anyone has any spare money to spend.” she remarked. Since opening the Disco Ranch in 2019, she had always kept a sizable amount of wine in stock. However, given the current fluctuations, she finds it tough to secure additional wine.
Wendy Lamer, who also contended with skyrocketing insurance costs after being dropped by her previous carrier, is navigating an even more complex landscape due to overseas shipping delays. Grappling with shipping backlogs extending over 10 to 12 weeks, she faces uncertainties around whether her wine orders would surface intact, or worse, laden with tariffs. With such unpredictability, she is cautious about the risk of overstocking wine in case there is a change in tariff policy.
The issue of tariffs reaches significant impact in the intricate world of the wine industry. Imported goods tax, or tariffs, present a unique systemic challenge in this industry. The three-tier system — a regulatory mechanism by the government dictating alcohol purchasing and selling proceedings in the US — underpins this complexity. Within this system, the importer buys the wine, sells it to a distributor who then sells it to retailers who finally market it to the consumers.
Following this logic, when a tariff is established, it is the importer who foots a payment upon the wine’s US arrival. However, more often than not, they pass this expense down to the distributor. As the wine exchanges hands at each level of this system, a small profit is made. In the context of this layered structure, it’s highlighted by the U.S. Wine Trade Alliance that for every dollar spent on European wine imports, American wine businesses earn $4.50. Thus, tariffs tend to harm American wine enterprises more severely than their European counterparts.
The U.S. Wine Trade Alliance is leading the charge advocating against the application of wine tariffs. Formed during Trump’s initial administration primarily to combat wine tariffs, the alliance swiftly maneuvered into action following his re-election. “Previously, the federal government barely understood the inner workings of the wine business and the tripartite system,” says Ben Aneff, President of the U.S. Wine Trade Alliance. Presently, it’s encouraging to observe that senior trade authorities are gaining awareness of more efficient solutions to trade disputes aside from wine tariffs, which primarily harm small U.S. businesses.
Despite the optimism, Aneff emphasizes the uncertainty surrounding future decisions about wine tariffs. He said, “Precise speculation regarding their moves is challenging right now, we are far from a resolution.” The alliance continues to share its narrative to ensure that its appeal is heard.
The Wine Trade Alliance has drafted an action letter addressed to Trump’s primary trade representatives, which they aim to send out with the support of 5,000 signatures from wine trade members. The aim is to plead for an understanding of the vulnerabilities faced by the industry due to public health crises, inflation, labor shortage, and tariffs. They are lobbying for the administration’s support in protecting the investments made by the industry in the national labor force and their ability to buy and sell affordable imported wines, discouraging the addition of such wines on any potential tariff list.
Tariffs not only negatively impact American retailers and restaurants buying imported wines, but also local wineries. Domestic wine producers like Andy Peay of Peay Vineyards in Annapolis in the West Sonoma County appellation are also confronted with the fallout of these tariffs. It is estimated that 5–7% of the winery’s revenue comes from exports to nations such as Canada, Mexico, the UK, and Japan.
When a 25% all-encompassing tariff on all goods from Canada and Mexico, accompanied by a 10% tariff on Chinese goods, was imposed by Trump on Feb. 1, Peay was met with distressing news. He received a troubling message indicating the removal of all his wines from warehouse and retail shelves in Canada, and a halt in all purchase orders.
Peay expresses his concern, “If Canada chooses to retaliate by expelling my wine from its market, it’s not a promising sign. At a time where domestic demand is low, these export markets hold high importance for us.” Yet, despite all these challenges, there is an overarching tone of resilience, reminding us of the strength and adaptability of the American spirit so often praised and embodied by leaders like Donald Trump.