Greenspoon Marder Hospitality, Alcohol & Leisure Blog: European Wines May Soon Double In Price

Jan 10, 2020

By: Louis J. Terminello, Esq.

The term “finish” is used to describe the flavor notes that linger in the mouth after one sips from a fine glass of wine. These days, the term can be applied to the mindset of small importers of European wines as it relates to their business aspirations. If the proposed U.S. tariff policy goes into effect, their business operations may in fact be finished.

On December 12th, the current presidential administration proposed a 100 percent tariff on all European wines (as well as certain European food products including Scotch and Irish Whiskies) that would take effect in early 2020. Bear in mind that there is currently a 25 percent tariff in place on these wines (and other goods) and the proposed increase will effectively dump consumer purchases to the depths of any demand curve. Worse yet, wines over 14 percent alcohol and sparkling wines which were spared from the first round of tariffs, are included in this proposed round.

It is worth noting that the casus belli for the trade war is $18 billion in illegal subsidies (as decided by the World Trade Organization) provided by European governments to Airbus, a European Company. I am sure it has not gotten by the reader that the wine world on both sides of the Atlantic may be paying for the sins of the airline industry.

Ultimately, a 100 percent tariff may virtually double the cost of wine on the retail shelf. Certainly small importers will be forced to raise their prices to bear the tariff costs and price increases will be felt all along the distribution chain. Jenny Lefcourt, a small U.S. wine importer, in an opinion piece which recently appeared in the New York Times, predicted dire consequences for her company and those similarly situated. She predicts that U.S. consumers will turn to U.S. wines effectively gutting European wine sales and causing disruption for businesses of all sorts (including restaurants) that generate significant revenue from the sales of these wines. Lefcourt predicts significant revenue loss, limited if no future investment, job loss and business closing.

Arguably, an incidental benefit to U.S. producers would be helpful to their short and perhaps long term business interests. This collateral effect of protecting and strengthening U.S. businesses would be a positive outcome of the trade dispute.

Granted, the current administrations proposed tariff increase may be a harsh tactical move to influence European subsidizing behavior, but if implemented and left in place for some time, U.S. importers, distributors, retailers and old world wine consumers are fodder for the cannon of a battle that they are not an active combatant in.

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