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.
But that still leaves the expanded 100 percent tariff hanging over our heads.
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:
• The current 25 percent tariff covers French, Spanish, German, and British still wines with less than 14 percent alcohol. So some French red wines aren’t affected. In fact, several importers told me they’re “adjusting” the alcohol levels on their labels to get around the tariff.
• 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