What’s Going On with the Potential Wine Tariffs?

A glass this spring could cost a lot more than it does now.EXPAND
A glass this spring could cost a lot more than it does now.
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The Trump administration, in its crusade against the European Union and to bolster the bottom line of some of the world's richest companies, wants to tax the hell out of your bottle of cheap French rosé.

It has already imposed a 25% tariff on most French, Spanish, German and British wine and is threatening to raise the duty to 100% and include almost all wine made in Europe.

In other words, that $8 bottle of pink wine could cost as much as $16 this summer.

“This is the weirdest and hardest time I’ve had on this side of the wine business in 15 years,” says Wade Sanders, the North Texas regional manager for wholesaler Virtuoso Wine and Spirits. “It's especially difficult for those of us that deal with a portfolio flush with imports. We’ve all been sending emails and calls to the people in charge.”

Weird, because the tariff started with a 15-year dispute over European subsidies for aircraft manufacturer Airbus, in which wine is being penalized more heavily than aircraft parts. And it's hard because the initial 25% tariff, imposed in October, came with almost no notice, rhyme or reason.

Why tax wine if the issue is airplanes? In this, no one is quite sure how, if or when the Trump administration will levy the 100% duty, which has been hanging over the wine business since the 25% tariff was announced.

“It will really kick in once rosé hits,” says Dan Fredman, who runs Biagio, a wine and spirits shop near the American Airlines Center. “That's the imported wine people care the most about, that and Champagne. So far, it hasn't been too bad. But rosé will tell the difference.”

How did we get to this point?

  • The World Trade Organization ruled last fall that Boeing, with $10 billion in profits in 2018, was harmed by unfair European subsidies to Airbus, perhaps its biggest competitor. But, since Airbus has a U.S. subsidiary in key GOP stronghold Alabama, aircraft parts were taxed at just 10%.
  • Why wine? No one is quite sure. President Donald Trump's business background is in the hospitality business, which sells wine, and his family owns a winery in Virginia. One reason, from talking to wine industry officials, is that wine is seen as especially European, and the president's trade agenda has targeted the European Union almost as much as China.
  • French wine and Champagne, cheese and some luxury goods dodged a bullet this week when the Trump administration said it would hold off on adding a separate 100% tariff on those products in response to a French proposal to tax tech giants Google and Facebook. The U.S. companies, which pay almost no tax on their French operations, supported the president’s decision. Google's profit in 2018 was $9 billion; Facebook's was almost $7 billion.
  • The next key date is the middle of February, when the WTO is expected to announce that the U.S. gave Boeing illegal subsidies in retaliation against Airbus. Many in the wine business hope that will give the U.S. political cover to withdraw the 100% tariff threat and rescind the 25% tariff.
  • Prices in stores and restaurants have not always increased the full 25%. Retailers in the Dallas area said many European producers, importers and distributors have cut margins on some wines they consider essential to the U.S. market to keep increases to a minimum. But all bets are off when the 2018 rosés and whites are released in the spring.

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