Those of us involved in the import wine business have endured a few months of agita this winter, which was reduced—but not eliminated—in February.

In case some readers are not fully aware, here is the background: As a result of two separate trade spats between the U.S. and the E.U. (where the WTO found the US was indeed wronged) the United States Trade Representative threatened to retaliate with tariffs on all sorts of European goods, including wine. To clarify, tariffs are placed on specific products from specific countries in order to adjust (or punish for) unfair trade policies or trade imbalances. So last October—with minimal warning—the USTR imposed a 25% tariff on a bunch of stuff, including wine from Germany, France, Spain and Great Britain (? on that last one), excluding sparkling wine for some unknown reason. This means that a wine that retailed for $10 in September, could be about $13 in December. Not good, but not enough to get us to stop drinking white Burgundy.

But then Part Deux of the spat: in response to a proposed ‘Digital Services Tax’ the USTR threatened 100% tariffs (you read that right) rather than 25%, sweeping in sparkling wine, wine from Italy, Austria, and other European wine producing countries. This would have been a killer. The 25% tariff was partially absorbed by producers, importers and distributors—softening the blow a bit (though imports from France still fell 48% in November/December). However, no one can eat a 100% rate. Happily, on Valentine’s Day the USTR shelved the 100%, but left the 25% program in place. Presumably, the 27,000 + posted comments during the ‘Public Comment Period’ discouraged the USTR from pulling the trigger on this ill-advised 100% plan. Unfortunately, it was shelved not cancelled. They plan on revisiting the option in six months (which the rules permit). Of course, these trade spats have nothing to do with wine—nor cheese, knives, wine glasses or most of the other targeted product groups swept into this. But that is how the game is played.

We have heard some opine that a 100% tariff would not be catastrophic: we can drink American, Argentinian, Australian wine, et cetera; but not so fast. First, though we are admittedly biased/smitten with wine, there is no ‘substitute’ for Barolo, for Chablis, for Brunello di Montalcino, or for Mosel Riesling. But more concerning is that there are channels within the trade whose entire portfolio/livelihood is based on European wine. They cannot suddenly switch to importing wine from Chile or Canada—if for no other reason, someone else is already doing that/has the good suppliers. For total U.S. wine consumption, almost one-third is imported wine.  At GLWAS, imports are around 20% of our volume, but one of our teams boasts 95% of their sales are from France, Italy & Spain. So, if European wines essentially become unsaleable (and Pouilly-Fuissé at $65 per bottle wholesale would be exactly that), there would be ripples throughout the industry, including closures and job losses. Not to mention the loss of one of America’s greatest principles: Choice.

Please: as stated, this will be revisited by the USTR in August. Pay attention. Should the 100% threat come to the fore again, do yourself, your customers and your vendors a service: fight it.

 

 

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