Last October, American importers braced as wines from France, Spain, England and Germany were hit with tariffs: 25% (ad valorem duty) on still wines under 14% alcohol. The tariff also affected a wide range of European food and milk products, including cheeses such as Parmigiano Reggiano. Scotch and Irish whiskies ― and liqueurs and cordials from Germany, Ireland, Italy, Spain and the United Kingdom ― were also affected.
This tariff originated over a dispute regarding aircraft manufacturing subsidies. At the same time, a 10% tariff was also levied against Airbus, the European aircraft manufacturer that competes directly with Boeing.
Then the office of the U.S. Trade Representative threatened to raise the 25% ad valorem duty to 100% in early 2020. But wait, there’s more.
Additionally, a different 100% tariff was proposed for French sparkling wines, which were excluded from the 25% October tariff, over a separate disagreement with France’s digital service tax.
Sound confusing? Sound like you need a drink to sort it all out? Well, you might, but you might be choosing Crown Royal instead of Macallan, or Meiomi over Miraval for the foreseeable future.
Let’s start with the 100% tariff proposed for French sparkling wines. On Jan. 20, French President Emmanuel Macron tweeted, “Great discussion with @realDonaldTrump on digital tax. We will work together on a good agreement to avoid tariff escalation,” indicating that France had decided to temporarily halt implementation of the tax, effectively shelving the matter as the two countries negotiate. So, one bullet dodged ― for now.
Then, on Feb. 14, the U.S. trade office issued a “notice of modification of action” over the 25% tariff, the one that began last October. Effectively, it backed down from the 100% threat and maintained the 25% tariff, along with raising the existing tariff against Airbus from 10% to 15%. For the time being, we live with this.
What does all this feuding and taxing mean to the person who goes into a local grocery store or wine shop to buy wine? They’ll be paying $11 instead of $8 for a bottle of La Vieille Ferme French rosé.
Importers, distributors and retailers, who dug into their margins and held prices down until now, have to raise prices.
“The 100% would have probably closed my doors, so yes, it is somewhat a relief,” said James Gunter, who owns Wines with Conviction, a Dallas wine importing and distribution company specializing in French wine. “But it is still not right. It’s still levied on our best-selling category of wines.”
And for now, the 25% levy stands until August, when it is set by law for review. Before then, however, it could change again. The World Trade Organization will authorize the European Union to impose tariffs on Boeing aircraft in a May/June time period, setting the stage for a further tit-for-tat escalation, or a possible stand-down between the EU and the U.S.
This is a state-of-the-moment report, as this story is ongoing. But here’s the irony: According to IndustryWeek.com, a U.S. manufacturing and trade website, Airbus says that 40% of the parts that go into making a typical Airbus plane are manufactured in the U.S., affecting 275,000 workers in 40 states.
In the meantime, wine lovers can plan ahead by:
* Shopping now for your favorite French, Spanish or German wines and laying in a stock of bottles to last a few months.
* Italian wines are exempt from the current tariffs, so go ahead and keep enjoying your pinot grigio, chianti, prosecco and moscato wines.
* California wines are currently experiencing a production glut. They are likely to offer some consumer relief in the way of competitive pricing. Look to California for your warm weather rosé fix.
* Don’t forget your local producer. Texas wines have never been better. Give your local folks some love.
* And keep a flexible mindset. We’re living in an era of disruption, where events are very fluid and unpredictable. Stay realistic in your expectations. It’s only wine, and there are bigger forces in play during this election year.
Alfonso Cevola is a Dallas wine writer.