The news couldn’t get much better than that, could it?
No word from U.S. trade officials on the European offer, which was made on Friday afternoon. But several European government representatives said over the weekend that with the repayments, there’s no reason for the U.S. to continue the 25 percent tariff on French, Spanish, German, and British wines, as well as the levy on airplane parts and a host of other food and alcohol products, including whiskey and some Italian cheeses. The French finance minister was adamant: The U.S. must remove tariffs imposed on European products such as French wine, he told Reuters.
Reuters also reported that an industry source said the manufacturer, Airbus, made the concession because Europe and the U.S. are at “an impasse and need to get out of it. It is a way to show good faith and open the door to find a solution.”
In fact, the tariff has wreaked havoc on U.S. wine imports, the whiskey business on both sides of the Atlantic, and even airplane manufacturing. French wine exports to the U.S. have declined by as much as one-half since October 2019, when the tariffs were imposed. The U.S. Distilled Spirits Council, a trade group for whiskey producers, said U.S. and European companies “have suffered enough.”
And, because the Wine Curmudgeon appreciates irony, it’s worth noting that Airbus has stopped production of the plane that caused the tariff row, citing slow sales. In other words, we’re having a trade dispute about a product that no longer exists.
The Trump zombie tariff is lurking over the horizon, which means the price of European wine could double.
Why haven’t we been able to kill the Trump zombie wine tariff, which is bad economics and bad public policy?
July 13 update: Federal trade officials announced Friday that the U.S. has delayed imposing additional tariffs on French wine until January, as part of the dispute over the French tax on Facebook, Google, and Amazon. And there is still no word on whether the Trump Administration will impose additional tariffs on all European wine as part of the Boeing-Airbus trade dispute. So, yes, some good news — though not as good as so many have been reporting.
July 6 post: Just when it seemed safe to drink European wine without worrying that it could double in price, the Trump zombie wine tariff is lurking over the horizon.
That’s the 100 percent tariff on almost all European wine, which the Trump Administration proposed in February. The administration backed off then, raising tariffs on European airplane parts instead. Which made perfectly good sense, since the original trade dispute was about airplane parts.
But the proposal is back. Last week, the Office of the U.S. Trade Representative proposed tariffs on nearly $3.1 billion worth of European products and that would raise the current wine tariff from 25 percent to 100 percent.
None of this makes any sense, and not just because this whole thing is about airplane parts.
• The world economy is in recession. So why would any sane person consider raising taxes?
• The coronavirus. So why would any sane person consider raising taxes?
• France’s so-called digital tax on U.S. companies like Facebook, Amazon, and Google has somehow become part of the dispute, though why the federal government needs to protect these giga-billion dollar behemoths is beyond me. And doesn’t President Trump hate Amazon?
The good news, if there is any, is that most of the people I talked to say the tariff proposal is likely empty bluster, more posturing from an administration that has perfected bluster. Two wine industry officials, who asked not to be identified because of the sensitive nature of the topic, said they didn’t expect the 100 percent levy to be approved. One, who has been closely involved with negotiations, said, “My personal view is that the most likely outcome is no change” until the final World Trade Organization ruling later this year on the original aircraft parts dispute.
Having said that, this is no time for slacking off. After all, we all know how difficult it is to kill zombies. Hence, if you oppose the 100 percent tariff, you can leave a comment with the U.S. Trade Representative at this link. The comment period ends on July 26.
This edition of Ask the WC: Has the wine tariff pushed up wine prices? Plus, why isn’t rose sweet and whether South African wine is worth buying
Because the customers always have questions, and the Wine Curmudgeon has answers in this irregular feature. You can Ask the Wine Curmudgeon a wine-related question by clicking here.
Greetings, WC: Have wine prices gone up because of the tariff? I can’t tell, but I buy the same wine over and over, so I’m not a good person to ask. Watching my pennies
Dear Pennies: The biggest surprise with the tariff — to me, anyway — has been retailer reluctance to raise prices, and especially for the wines we write about on the blog. There have been exceptions, of course; I was in the country’s premier “natural food” grocer the other day, and it looked like every French and Spanish wine had gone up exactly 25 percent, the amount of the tariff. But many of the other retailers I have visited or talked to are making an honest effort to hold the line. I’m especially seeing many retailers bring in similarly-priced labels to replace the tariff wines. Which, all things considered, makes me a lot less cranky about the tariff. Still, as one Dallas retailer told me, all bets are off when the new rose vintages arrive in the next month or so.
Dear Wine Curmudgeon: Is rose supposed to be sweet or not? Some taste like white zinfandel, and others don’t. When did this start? Pinked out
Dear Pinked: Rose is dry. White zinfandel is sweet. This used to be cut and dried. But in the wine business’ ill-conceived attempt to woo younger consumers, they’re sneaking residual sugar into “dry rose.” Typically, most European pinks are still dry, so you’re safe with French, Spanish and Italian wines. One way to tell: If the dreaded word smooth appears on the back label, I wouldn’t be surprised if the wine was sweet. Rose is supposed to be fruity, not smooth.
Hello, Wine Curmudgeon: Am I starting to see more South African wine in the U.S.? Is it worth buying? Curious
Dear Curious: The answer to the first part of your question is yes and no — yes, because sales have increased substantially, and no because sales are starting from such a small base. South African wines, save for a burst of popularity in the late 1990s, have been few and far between in the U.S. But quality has improved markedly since then, and it’s possible to find Rhone-style red blends, whites like chenin blanc and sauvignon blanc, and even dry rose at a fair price.
We dodged one 100 percent tariff, but will there be another one? And what about the 25 percent tariff?
How confusing is the current wine tariff situation? An editor, sharp and smart, was completely baffled when I wrote that there was a chance the Trump Administration would raise the current 25 percent tariff to 100 percent and expand it to include all European wines.
“Wait a minute,” she emailed me. “I don’t know about that. Didn’t they just decide to hold off on the 100 percent tariff?”
Yes, they did. But that was a 100 percent tariff on luxury goods, including Champagne, to punish the French. That’s because they had the temerity to suggest that U.S. tech giants like Google and Facebook should pay taxes on their French revenue. The French and U.S. governments announced this week that they would continue negotiations over France’s proposed digital tax, and that the 100 percent Champagne tariff is on hold.
My editor wasn’t the only one befuddled. “I honestly have a hard time keeping track of what’s going on,” one U.S. importer told me this week, and it’s her job to know what’s going on. “No one is really covering the issue, not even the New York Times. So it’s hard to know what’s happening, even if it has already happened.”
Your wine tariff update primer
Which, of course, is why the Wine Curmudgeon is here. Consider the following your wine tariff update primer:
• Nevertheless, imports from three of those countries have dropped dramatically since the tariff was imposed. The U.S. Census Bureau reported that Spanish shipments to the U.S. declined almost 17 percent in dollar terms from October to November 2019, while German shipments fell 40 percent over the same period. The monthly totals were the lowest for Spain since 2006, and the least since 2002 for Germany. French wine imports, meanwhile, fell by almost two-thirds in dollar volume over the October-November period, and the total was the least since 2008.
• Prices have not always increased the full 25 percent. The same importer told me that some European producers, importers, and distributors have cut margins on some wines they consider essential to the U.S. market to keep increases to a minimum. But all bets are off when the 2018 roses and whites are released in the spring.
• The next key date is the middle of February, when U.S. trade officials must review the original decision. They can keep the tariffs, impose new ones, or rescind them. In addition, the World Trade Organization is expected to announce later this year the U.S. gave Boeing illegal subsidies in retaliation for EU subsidies to Boeing competitor Airbus. That’s because this entire mess started when the WTO ruled in October that those EU subsidies were illegal, and the Trump Administration responded with the 25 percent levy and threats of the 100 percent tariff. Many of the people I talked to this week hope that the WTO decision against Boeing will give the U.S. political cover to withdraw the 100 percent threat and rescind the 25 percent tariff.
No one is quite sure. President Trump’s business background is in the hospitality business, which sells wine, and his family owns a winery in Virginia. So a tariff would seem contradictory. On the other hand, say a variety of wine industry officials, wine is seen as especially European, and the president’s trade agenda has targeted the European Union almost as much as China.
And one Midwest retailer told me the tariff is surprisingly popular among wine-drinking Trump supporters. This no doubt explains the steady trickle of blog subscription cancellations over the past couple of weeks, since I have made it quite clear I oppose the tariffs. And no doubt this post will lead to more cancellations.
Ironically, there seems to be little enthusiasm for bringing in more wine from countries not included in the tariff, including South Africa, Chile, and Argentina. The problem, says one importer, is the complexity of adding new producers to the wine supply chain – first, finding a producer who fits the niche the importer needs, and then finding enough distributors in the US to handle the new wines. And this doesn’t include the paperwork and bureaucracy to add the wines
Panic wine buying, as the Wine Curmudgeon stocks up before a possible 100 percent European wine tariff.
The Wine Curmudgeon, faced with the prospect of a 100 percent European wine tariff, does some panic wine buying
The picture pretty much says it all. I spent an hour or so last week at Dallas’ biggest wine retailer, stocking up in case worse comes to worst. The result? 28 bottles of wine for $290. It’s good to know that the Wine Curmudgeon hasn’t lost his touch in the face of an international crisis of epic proportions.
A few thoughts after my panic wine buying:
• Lots of gaps on the shelves. Lots. I bought the last two bottles of the Chateau Bonnet white, and there wasn’t any Chateau Bonnet red or new Hall of Fame member Azul y Garanza, the $11, 1-liter Spanish tempranillo. Apparently, I’m not the only one who has panicked.
• Lots of cheap wine I haven’t seen before. It looked like the retailer had done some buying, too, stocking up on inexpensive European wine before the 25 percent tariff raised its prices. I bought some of these new wines, and will report back as the situation warrants.
• I even bought California wines. This included the always dependable McManis as well as the Shannon Wrangler red blend, which was the wine of the week 4 ½ years ago. Oddly enough, the wine cost $2 less this time.
This week’s wine news: A $900 wine helped the New York Yankees sign Gerrit Cole, the best free agent pitcher on the market. Plus, a couple of decidedly Bah Humbug developments about the wine tariff and distributors.
• I’ll take two, please: The New York Yankees may not have signed top free-agent pitcher Gerrit Cole because they threw a record-setting $324 million at him. Rather, a couple of bottles of $900 Italian wine may have been equally as important. The Yankees gave Cole the 2004 and 2005 Massetto — made with merlot, of all things — and he practically melted. If I had known Cole was a wine aficionado, I could have helped my beloved Chicago Cubs sign Cole. Frankly, he would get a better deal with 180 bottles of the $10 Bieler Provencal rose than two bottles of an Italian merlot, no matter how good it is (and my Italian wine expert says it’s good, but not that good).
• More tariff threats: The U.S. government is considering boosting October’s 25 percent tariff to 100 percent and including almost all beer, wine, and spirits produced in any European Union country. That would include those exempted in October. You can read the sad details at the link; why anyone would want to destroy the European booze business is beyond me. That’s just spite. I’ve talked to a couple of importers and producers, and they’re urging wine drinkers who think this thing is foolish to leave a comment with the feds. Go to www.regulations.gov, enter docket number “USTR-2019-0003” and click search. Then, click “comment now” and leave your comments/concerns. Comments are open until Jan. 13.
• Not enough distributors? The WC has written quite a bit about distributor consolidation, and how it benefits no one but the distributors and their biggest customers. Turns out someone agrees with me. Cyrus Azari, writing for a trade blog, says there may not be enough distributors for all of the wine in the market, and this is a “huge pain point for wineries who get cut off from markets.” In other words, no distributor means the wine can’t appear on store shelves, since the law requires every wine to have a distributor. That sounds like a fair system, yes?
Look out! They’re shelling us with premiumization and the wine tariff!
You keep a stiff upper lip, try to ignore the frustrations and complications, and soldier on – because quality cheap wine is worth it
How do you write about quality cheap wine when the wine industry and the federal government have gone out of their way to make quality cheap wine an anachronism?
Because, as we celebrate the blog’s 12th birthday, that’s the situation I find myself in. Premiumization and the 25 percent European wine tariff have made it all but impossible to find the kind of $10 and $12 wine that’s worth writing about. I feel like a character in one of those British Raj movies where the garrison is stranded in a fort on a remote hilltop and we’re being picked off one by one and we know the relief column isn’t going to arrive in time.
Yes, there is still plenty of cheap wine on store shelves, but just because a wine is cheap doesn’t mean it’s worth drinking.
The irony here is that I seriously considered ending the blog after this final birthday week post (with a Hall of Fame wrap-up in January). And if I had known about the wine tariff when I was pondering the blog’s fate this summer, it would have been that much easier to close it after 12 years.
Changing my mind
But two things happened to make me change my mind: First, and most practically, the site’s hosting company charged me for another year in August. So, if I closed the blog with this post, I would have been stuck paying for nine months of service I didn’t use. Second, four people whose opinions I admire and respect pointed out that if I didn’t keep doing this, who would? And that despite my frustration with the blog, there is and will be a need for it.
For the frustrations have been endless. These days, it’s not just about paying homage to our overlords at Google or dealing with out-of-touch producers and distributors and too many incompetent marketers. Or fending off the sponsored content and the fluff pieces that so many others in the wine writing business have turned to in an attempt to make money at something where there is little money to be made.
These days, it’s about making sense of a business that is divorced from reality. Which, frankly, makes me feel like I’m using a croquet mallet to comb my hair.
Am I missing something here? Aren’t declining sales a bad thing? Shouldn’t an industry do something to reverse the decline, instead of furthering it by raising prices?
But not, apparently, if it’s the wine business in the second decade of the 21st century. Because, of course, premiumization. I’ve probably written entirely too much about the subject, but mostly because I can’t believe anyone in wine still takes it seriously. Though, and this is welcome news, there are others who are beginning to question its validity. Damien Wilson, PhD, who chairs the wine business program at Sonoma State University, is blunt: Premiumization can be a path to ruin, since sales decline and higher prices scare off new wine drinkers.
The less said about the tariff the better. It’s as counterproductive as premiumization, and its adherents are blinded by politics to economic reality. That the tariff could forever wreak havoc on U.S. wine consumption is beyond their comprehension.
So let me shepherd my ammunition, keep my head low, and hope against hope that the relief column gets through. And keep a very stiff upper lip.