Chris Renfro in his retail wine shop Friend of a Friend in San Francisco, Oct. 22, 2024. President-elect Donald Trump asserts tariffs will benefit American manufacturing and create jobs, but many economists and trade experts have argued that tariffs could result in higher costs and damage American businesses. (Carolyn Fong/The New York Times)
By SETH KUGEL
The wine world is bracing for the potential effect of the tariffs that President-elect Donald Trump has said he will impose on most foreign goods coming into the United States.
Trump asserts that the tariffs will benefit American manufacturing and create jobs. But many economists and trade experts have argued that tariffs could result in higher costs and damage American businesses. Tariffs could be particularly harmful to the American wine trade.
This would be the second time Trump has imposed tariffs on wine. In October 2019, he placed a 25% tariff on many European foods and beverages in retaliation against the European Union over subsidies the union gave to to Airbus, the European aerospace company. That tariff caused great pain in the American wine business. They were rescinded by President Joe Biden in 2021.
This time around, Trump has talked about tariffs of 10% to 20% on most foreign products and 60% or more on Chinese goods. They would not simply raise prices on imported wines. They could result in higher prices for domestic wines if distributors raise prices to make up for loss of profits on foreign goods. They could also harm businesses throughout the industry, from farmers, producers, importers, distributors, shops and restaurants to warehouses, transport companies and label and bottle manufacturers.
Most of these are small American-owned businesses that already operate with slender profit margins and lack the resources or capital to withstand prolonged cuts in their bottom lines.
“Wine, more than almost any product, is spectacularly important for American small businesses,” said Ben Aneff, managing partner of Tribeca Wine Merchants in New York and president of the U.S. Wine Trade Alliance, which works to ensure a free-trade environment for wine.
He said the American alcoholic beverage business was singular because, unlike others, it is legally bound by a three-tier system. This system requires producers of, say, French wines to sell to an importer, who in turn must sell to a distributor, who then sells to a retailer or restaurant. For every dollar spent on European wine, Aneff said, American businesses make $4.52.
“The vast majority of these businesses are small and family-owned, and because of this, the vast majority of the revenue stays with American businesses,” he said. “That’s why these tariffs are a poor remedy to change the behavior of Europeans.”
This year, Trump has characterized his tariff proposals as benefiting the American economy rather than as retaliation against European practices. Not that European wine producers are profiting enormously from American sales. Many are small family estates that might not easily adapt if, for example, American importers were to buy fewer bottles or ask for price breaks to make up for the tariffs.
“It’s not great for them,” said Zev Rovine of Zev Rovine Selections, an importer and distributor in New York. “They’re already dealing with climate change and a difficult market. To have a scary fluctuation in the market would be a tough blow.”
Patrick Cappiello, the proprietor of Monte Rio Cellars in Sebastopol, California, which makes moderately priced wines, has been a forceful advocate for American wines on his Instagram pulpit. But he is torn on the issue of tariffs.
On the one hand, he said, raising the price of European wines, which for a variety of reasons are often less expensive than American counterparts of similar quality, might benefit American producers. But he acknowledges that it will hurt American businesses.
“I worry,” he said. “The majority of the people who distribute my wine in the U.S. also import wines. They will be hurt, and that’s bad for me. The negative of all this is, it doesn’t make American wines cheaper.”
Many in the wine trade don’t think American wineries will benefit. For one thing, good wines are not fungible. They are distinctive, often singular products of the soil, climate and culture where the wine was grown and produced. A chardonnay from Chablis in France will be different from a chardonnay grown in California. Many foreign wines don’t even have American counterparts.
Mary Taylor, an American importer, buys wines from small family farms in Europe and sells them under the Mary Taylor label. She believes a tariff would hurt small producers and reduce the diversity of wines available to Americans.
“There’s no magliocco from Calabria here,” she said, referring to a red grape grown in the Calabrian region of Italy. “There’s no replication. It’s just going to make all wine more expensive and more commoditized. The big players are going to dominate, and all the little guys will go out of business.”
As it happens, Taylor said, Mar-a-Lago, Trump’s club and residence in Florida, sells Mary Taylor Bordeaux Blanc on its wine list. “Trump supporters appreciate wine, too,” she said. “They don’t want to see it destroyed.”
Because of the three-tier system governing alcoholic beverages, tariffs will hit wine harder than, say, a French luxury handbag maker, as there are more small American-owned businesses involved in the chain of wines sales and distribution.
Aneff used the handbag example from foreign luxury goods companies, in which relatively few American businesses would be harmed.
“Chanel can make, produce, open a store on Fifth Avenue or kiosk in Macy’s and sell everything themselves,” he said. “They will capture 100% of the revenue. On huge numbers of French products, the revenue goes directly back to France.”
“We understand there are problems, but wine is not one of them,” Aneff said. “Let’s not screw it up.”
Some retailers and restaurants may try to buy extra wine in the interval before Trump takes office and before any tariffs can take effect. Grant Reynolds, the proprietor of three Parcelle businesses in New York, a retail shop and two wine bars, said he has already been approached by importers offering to sell him additional wine.
It’s a potentially risky strategy. Businesses are already well stocked for the last quarter of the year, the busiest time for wine and spirits sales. They might be stuck with excess inventory in the slow first quarter of the new year. Or, like Bufalina, they may have no room to store excess bottles.
“It’s not just a wine drinkers’ issue — we’ll see the impact on restaurants,” Reynolds said. “They are complete ecosystems of labor, rent and wine and food costs. If one goes out of balance, the other will have to be adjusted. You might see less people on staff or lower quality ingredients for food.”
A worst-case scenario would be that people stop drinking wine or switch to other beverages, like hard seltzer or cocktails. That would be a problem for restaurants like Bufalina, which doesn’t have a license to sell liquor, and it won’t benefit the American wine industry.
“If tariffs force people to drink less wine,” said Cappiello, the California winemaker, “it doesn’t help anybody.”
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