Wine Tariffs! What is the Impact?
In October of 2019, the United States imposed a 25% tariff on some European still (non-sparkling) wines. Importers, wholesalers and retailers have had to adjust pricing in order to keep bringing these wines to your national retailers and local store shelves so the effect on you as a consumer may have been small or not noticeable at all. Shortly, the US Trade Representative (USTR) is considering imposition of a 100% (on top of that 25% tariff from October) tariff on European wines (including still and sparkling), olive oils, cheeses, Scotch and Irish whiskies.
These tariffs have some effect on the end producers of goods (wine, olive oil, cheese, etc.) but here in the US, the effects will be a cascading effect from importers, wholesalers, retailers and at the end of the line, consumers.
For a minute, let’s discuss an example of how the tariff would work. A bottle of wine from France costs seven euros when purchased at the vineyard with a current cost of shipping and duty paid of $17-25 per case. The bottle would retail at a US wine store at about $19.99. With the tariff, in addition to the shipping and duty of $17-25 there would be an additional cost of $7 per bottle. That cost must be passed onto the consumer and the bottle that sold for $19.99 would now be $37.99. (Thanks to Free Run Wine Merchants for the example.)
While the costs would increase on store shelves dramatically, remember that wine stores do not have unlimited cash flows available in order to front the increased costs. Also, a $37.99 bottle of wine is going to sell slower than a $19.99 bottle of wine; therefore, the turnover of the wine, between when it is purchased and when that bottle sells, will slow down. More than likely, the store will buy less wine since it needs to maintain a flow of cash, so that it can order more. Less purchasing by wine stores means reduced business for wholesalers and importers, as well as less business for shippers, freight storage, freight delivery, and every place in the order and delivery chain. And we haven’t even mentioned restaurants in this discussion!
The bottom line is that, if this tariff is imposed, it will mean that some small businesses will close, and many people will lose their jobs as the demand for these products decreases due to the increased prices. There are hundreds of thousands of people employed in the United States who depend on these imports for their livelihood.
Per a recent article in Vinegar, Mannie Berk, of The Rare Wine Company, stated that sales by US importers total $5.5 billion, sales by US wholesalers $7.8 billion and sales by US retailers and restaurants more than $15 billion. Only $4.25 billion is returned to Europe to pay for the wine, which means that 85 percent of the money stays in the US economy, which helps maintain thousands of jobs, in addition to the billions that go to pay various levels of government taxes.
Here are some more articles that provide information on the tariffs should you be interested in learning more: Food & Wine Magazine, Medium, New York Times, and Los Angeles Times.
If you feel strongly against the tariffs, you can email your representatives here, which is a link provided by the National Association of Wine Retailers. Also, you can read the comments at the US Trade Representatives site and are free to submit your own comments, as well. All comments must be submitted by Monday, January 13th.
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