The tariff tempest has been confusing. In October, the United States imposed a 25 percent tariff on wines and other products from France, Germany, Spain and Britain. Inexplicably, this measure did not apply to wines over 14 percent alcohol or to sparkling wines. (Two wines in my annual greatest values list have already increased in price because of the October tariff.) Then on Dec. 6, the Office of the U.S. Trade Representative said it was considering 100 percent tariffs on French goods, including champagne and other sparkling wine, in retaliation for France’s new digital services tax. A week later, on Dec. 12, the USTR proposed slapping 100 percent tariffs on a wide spectrum of European goods in retaliation for the E.U.’s subsidies to Airbus.
Here’s how these tariffs could affect U.S. consumers most directly — in the pocketbook. (These are hypothetical examples; markups can vary widely.) Let’s say an importer pays $2 per bottle to a winery in Italy. It costs about $2.50 per bottle on average to ship that wine to the importer’s warehouse in the United States. So the importer’s cost for that bottle is $4.50. An average importer that also acts as a distributor would sell that bottle to a restaurant or retail shop for about $9. The restaurant sells the wine for $9 by the glass, and probably close to $40 by the bottle. The retailer sells it to you for about $14. If the importer sells it to a distributor, the importer charges less, but this adds another markup to the price as the distributor takes its cut.
Now, suppose that bottle held French wine. With the 25 percent tariff imposed in October (50 cents on the $2), the wine is now $10 a glass at your favorite wine bar, or $15 for a bottle in a store. With a 100 percent tariff, either of those wines would be $13 by the glass and $21 for a bottle, as the tariffs reverberate through the distribution system.
What about higher-end wines? If the ex-cellar price paid to the winemaker is $10 a bottle, with no tariff the wholesale price to restaurants and wineries would be about $18 (markups tend to be lower for higher-priced wines). This wine would probably sell for $18 a glass or about $70 by the bottle at a restaurant. You’d find it in a store for about $28. With a 25 percent tariff, the wine is beginning to be priced out of the by-the-glass market at $22, and the retail price would be $33. The full tariff makes it $51 retail. The wine would now be too expensive, at about $34, for by-the-glass pours in restaurants, and the bottle would probably reach the triple digits on the wine list.
You may shrug if your favorite Bordeaux by the glass at your neighborhood restaurant is replaced by a malbec from Argentina, and you may say a chardonnay is a chardonnay, whether from France, Chile or California. But if your favorite $14 Chianti suddenly costs $21, and your $40 champagne is now $70, you are likely to change your buying habits.
Who else will be hurt? Importers will pay the tariffs directly. Those with significant inventory already stateside, or portfolios that include wines from outside Europe, may be able to weather the storm if the tariffs don’t last too long. Others say the tariffs could drive them out of business.
“I spent 20 years of my life building a successful business, and in one signature the Trump administration could make it all crumble,” said Jenny Lefcourt, co-owner of Jenny & Francois, a New York-based importer specializing in natural wines. “This will affect a huge portion of the wine industry, from importers to distributors, wine shops to restaurants, European wineries, to in fact American wineries, who won’t have nearly as many stores to sell to,” she wrote in an email to customers urging them to comment on the USTR proposals in opposition to the tariffs. (Comments are being taken through Jan. 13.)
Lefcourt’s company represents 100 producers, 85 of whom are in Europe, she told me in a separate email. The company has 10 employees and sells to 50 distributors across the United States.
U.S. wineries will not necessarily benefit from having less competition from Europe. California winemakers Steve Edmunds, of Edmunds St. John winery, and Jason Haas, of Tablas Creek Vineyards, spoke out against the tariffs in comments to USTR and on social media. They noted that their sales depend on the same distributors, restaurants and retailers that will be affected.
Haas took a global perspective. “The American consumer, who enjoys the world’s most dynamic wine market, would see increased costs and decreased selection,” he wrote. “And the cost to the European farmers and winemakers, many of whom have been farming their lands for centuries, would be heartbreaking.”
Larger European wineries may be able to focus their attention on other markets if their wines become too expensive for U.S. consumers. China — or at least Chinese wine lovers — may be the big winner. But smaller wineries, family operations that have existed for generations, have built relationships with U.S. importers that may now be sorely tested. On both sides of the Atlantic, small businesses will feel the most pain.
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