The latest salvo in the escalating trade war between the United States and the European Union has arrived in the form of a dramatic wine tariff threat from President Donald Trump.
On Thursday, Mr. Trump took to social media to declare his intention to impose a 200 percent tariff on all wines and alcoholic beverages from the European Union, ostensibly in response to the EU’s recent decision to levy 50 percent tariffs on American whiskey and other goods.
The immediate question is: Who benefits from such a move?
The answer, it seems, is no one—least of all the American consumer. If enacted, these tariffs could reshape the wine industry in the United States, with severe consequences for importers, distributors, restaurants, and even domestic winemakers who, contrary to Mr. Trump’s assertion, may not find themselves in an advantageous position, as NYT has reported.
The U.S. wine industry is already contending with a myriad of challenges. Domestic sales have been declining, with more wineries closing their doors in recent years. Public-health campaigns have increasingly highlighted the health risks of alcohol consumption, dampening consumer enthusiasm. Meanwhile, climate change has devastated vineyards across the country, bringing wildfires, spring frosts, and droughts that have compounded financial struggles.
For many winemakers, particularly those in California, international markets have been crucial. Yet tariffs on Canadian and Mexican goods have already harmed producers like Frog’s Leap, a Napa Valley winery that heavily relied on exports to Ontario. The company’s proprietor, John Williams, lamented the loss of business due to retaliatory tariffs: “Ontario was our largest trading partner. They’ve cancelled all orders, including bottles that had already been specially labeled for the province.”
Now, with a potential new round of tariffs on European wines, the industry faces yet another hurdle. As Williams put it, “We’ve all been waiting for the next natural disaster. I see this as an unnatural disaster.”
A Blow to Importers and Retailers
For U.S. importers and distributors, the proposed tariffs could be catastrophic. Demeine Estates, a California-based importer, has already been stockpiling European wines in anticipation of higher costs. “You can’t do it for everything, because then you get stuck with inventory,” said Philana Bouvier, the company’s president. “You have to forecast correctly, and time will tell if we did.”
For smaller importers, there is no such buffer. Ben Aneff, president of the U.S. Wine Trade Alliance, warned that the tariffs “would absolutely shatter beloved businesses in every city in America.” Restaurants, he noted, rely heavily on European wines to attract customers, and replacing them with New World alternatives is not always feasible. “It’s hard to imagine trattorias without Italian wines or Spanish restaurants selling New Zealand sauvignon blanc,” he said.
In 2019, the Trump administration imposed a 25 percent tariff on European foods and beverages, which was only lifted in 2021 by President Joe Biden.
Doug Polaner, an importer based in New York, recalled the difficulties of that period. “We hobbled through,” he said. “But 200 percent? That’s a nonstarter.” Now, he and others are scrambling to reassess shipments and ensure they don’t get caught with “goods on the water”—wines in transit that could become financially unviable overnight if new tariffs take effect before their arrival.
While large corporations like Champagne producer Louis Roederer may weather the storm thanks to their diversified investments in American wineries, smaller businesses are not as fortunate. Roederer USA’s chief executive, Guillaume Fouilleron, admitted that while the tariffs could harm the company’s European arm, its American holdings might see a boost. However, even this silver lining is not enough to outweigh the broader disruption the tariffs would cause.
Chris Leon, owner of Brooklyn-based wine retailer Leon & Son, highlighted a key issue often overlooked: the symbiotic relationship between European and American wine sales. “If you deplete those funds from the equation, you reduce the opportunity to buy wines from other places,” he said. “You’re not just hurting European wines, you’re hurting the chances of Americans to buy American wines.”
This is because the financial backbone of wine distribution in the U.S. depends on a mix of imports and domestic products. Without the lucrative trade in European wines, many small businesses will be unable to sustain their operations, leading to job losses for distributors, sales representatives, and restaurant workers alike.
Economists generally view tariffs as a blunt instrument that can lead to unintended economic consequences. While they are often deployed as a tool of economic nationalism, their primary effect is typically to raise costs for domestic consumers and businesses while inciting retaliatory measures from trade partners. The EU has already demonstrated its willingness to hit back with its own tariffs on American whiskey, and it is unlikely that the bloc would stand idly by if Mr. Trump follows through on his threat.
At a time when the global economy is striving for stability, such protectionist measures threaten to exacerbate existing inflationary pressures and disrupt supply chains that are still recovering from the COVID-19 pandemic and geopolitical turmoil.
Mr. Trump insists that these tariffs would be “great for the wine and Champagne businesses in the U.S.,” but the evidence suggests otherwise. Domestic winemakers, far from welcoming the move, recognize the potential for widespread collateral damage.
John Williams warns that this policy could backfire spectacularly: “On the surface, it may look like a boon, but if you look underneath, I think you realise it’s really damaging to our industry at a time when we really don’t need this.”
With small businesses on the brink, restaurant wine lists in turmoil, and distributors scrambling to reassess their imports, the proposed 200 percent tariffs on European wine could end up as a pyrrhic victory. The American consumer, in the end, will bear the cost—not just in price hikes, but in the erosion of choice and quality in one of the world’s most vibrant wine markets.
For now, all eyes are on Washington and Brussels as this latest trade dispute unfolds. But one thing is certain: tariffs this steep could leave a bitter aftertaste for American wine lovers.
Main Image: PRA assumed (based on copyright claims). CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=370999
