My company is among those imperiled. Thirty-three years ago, my brother and I started a tiny wine distribution company out of a single shared office on Long Island. Believing in the free-market ideals at the heart of the American Dream, we gradually built this business into one that today has more than 180 employees. I fear that much of what we have built and many of these jobs will be lost if the Trump administration continues to pursue this anti-business policy.
Incredibly, the looming 100 percent tariff on European wine is the result of a fight between the United States and the European Union over subsidies to airplane manufacturers. You might ask what wine has to do with airplanes, other than a glass that might be served in flight. We’ve been asking ourselves just that every day since October, when President Trump’s chief trade negotiator, Robert E. Lighthizer, slapped a 25 percent tariff on many E.U. wines and other agricultural goods. The purpose of these tariffs was to pressure the E.U. to halt subsidies to Airbus.
Even though the World Trade Organization had earlier endorsed the United States’ right to levy a punitive tariff, that doesn’t mean doing so was a good idea. For example, the only businesses being hurt by the 25 percent wine tariff, according to data from the Global Trade Atlas, are U.S. wine businesses. Since October, shipments from France alone to the United States have declined nearly 50 percent by volume. During that same period, overall French wine exports actually increased, with China’s purchases rising 35 percent.
Much European wine is produced in limited quantities, yet it has worldwide appeal. With little ability to increase supply, European suppliers respond to a drop in U.S. demand by selling to other countries that are happy to pick up the slack. The current 25 percent tariff thus has damaged U.S. wine importers without hurting its intended E.U. targets. European wineries have simply sold their goods elsewhere.
Some will say: Can’t consumers just buy wine from non-tariffed countries, and won’t that be especially good for domestic wineries? Not really. U.S. wine producers generally oppose the tariffs because they risk destroying a vital part of the distribution network that these producers rely on. And European wines are often so distinctive that they are not easily replaced.
For example, Champagne can only be grown in a small area of northern France called Champagne. One can drink a substitute, such as a sparkling California wine, but most Champagne lovers hardly see that as a satisfactory replacement. Likewise, Chablis, a Chardonnay wine, is grown in chalky soils that give it a flinty expression different from Chardonnay grown anywhere else in the world. There are innumerable other examples of such region-specific distinctiveness.
Personally, I love American wine, and our company proudly represents more than 100 American wineries — but about 55 percent of our sales, by value, are of European wines. Many of our competitors sell only European wine. A 100 percent tariff, for instance, would raise the price of a $50 bottle of Burgundy, Rioja or Barolo to over $100 — but that assumes the bottle would be imported at all, since these tariffs would essentially make many European wines unsaleable in the United States.
That would endanger an industry comprising 46,740 retail businesses selling wine, beer and liquor, as well as importers and distributors, which together employ over 380,000 people throughout all 50 states. The ripple effect would also undoubtedly cause layoffs among warehouse workers, truck drivers, salespeople and others in a vastly networked industry.
Restaurants already work on razor-thin margins. Eliminating or further reducing their profit margin on wine would threaten their existence, too.
Tariffs on wine are inefficient and ineffective, and do disproportionate harm to U.S. businesses, just as tariffs do when applied to other products. I certainly hope the Trump administration takes these factors into account before risking the obliteration of a thriving industry.