Tariffs are a dirty word these days in many sectors of agriculture, which break into loud cheers whenever a trade deal is announced that promises to eliminate at least some of the duties imposed by the U.S. and others as part of President Donald Trump’s trade war.
But one would be hard pressed to find an industry in which tariffs are more unpopular than in the world of wine and spirits, as an ongoing dispute between the U.S. and the European Union is showing.
In October, Trump’s administration placed tariffs on $7.5 billion worth of European imports after prevailing in a World Trade Organization case in which the EU was found to have illegally subsidized Airbus, a French airplane manufacturer.
Among the tariffs are a 25 percent duty applied to bottled table wine from France, Spain, Germany and the United Kingdom. In December, U.S. Trade Representative Robert Lighthizer’s office threatened to raise the tariffs to 100 percent and apply it to all wines rather than a set list. The increase could be imposed as soon as next month.
This threat has caused a veritable panic within the American wine industry, which has been pushing back against assumptions that it would benefit from having European wines effectively priced out of the market.
A recent analysis by the Distilled Spirits Council asserts the current tariffs have already resulted in U.S. jobs being eliminated and hiring halted, and if the duties remain in effect or are increased, up to 78,000 U.S. jobs could ultimately be lost.
For one thing, U.S. wine producers fear an escalation of retaliatory tariffs that have already had a significant negative impact on the industry, they say. For instance, American wine exports to China were down 48 percent through the first three quarters of 2019.
But the real concern is that a 100 percent tariff would cause a devastating disruption of the U.S.’ three-tiered system of producers, distributors and retail businesses. Jason Haas, a partner and general manager at the Paso Robles, Calif.-based Tablas Creek Vineyard, explained as much in written comments submitted to the USTR.
“None of the 50-plus distributors that we work with represents exclusively domestic wines; all have a diverse portfolio including wines that will be impacted by the proposed tariffs,” Haas wrote. “Many get the majority of their business from European wines.
“For those distributors, the proposed tariffs amount to a death sentence,” he wrote. “Sales will fall, in most cases dramatically, impacting their ability to represent our wines.”
Haas wasn’t alone in appealing to Lighthizer for restraint. Two leading wine-sector organizations – the San Francisco-based Wine Institute and Europe’s Comité Européen des Entreprises Vins (CEEV) – issued a statement calling on the U.S. and EU to end tariffs entirely and stop targeting wine in unrelated trade disputes.
Trump talks a good game when it comes to wanting to help farmers. But will he listen to the pleas from one of the U.S.’ most successful and prestigious agricultural sectors? Only time will tell.