President Trump recently announced a proposal to impose a substantial 200% tariff on wine, Champagne, and other alcoholic products imported from the European Union. He expressed optimism on social media, stating, “This will be great for the Wine and Champagne businesses in the U.S.” However, this announcement has stirred mixed reactions among Californian winemakers and grape growers, who produce the majority of U.S. wine. While some see the tariffs as a potential boost for domestic wines, others are concerned about the detrimental impact on an industry already facing challenges from declining demand and environmental issues like wildfires and droughts.
John Williams, founder of Frog’s Leap in Napa Valley, voiced his apprehensions, stating, “Even though we’re a farming family business, there’s a global link. This is not good for our industry in general.” European alcoholic beverages represent a significant portion of EU exports to the U.S., and the proposed tariffs could increase costs for American consumers purchasing wine at restaurants or liquor stores. Trump’s tariff proposal marks another escalation in ongoing trade tensions, also evident in the 25% tariff on steel and aluminum imports from the EU. In retaliation, the EU plans to levy a 50% tariff on American whiskey starting in April.
Williams, with over 45 years in the wine business, worries about the impact on wine distributors, who are critical to the global wine supply chain. These distributors purchase directly from producers and sell to retailers and restaurants, making their health vital to wineries worldwide. Additionally, Williams exports wine to Canada, where trade tensions have led some stores to remove American alcohol brands from shelves, potentially affecting his business.
The wine industry is also grappling with declining demand as Baby Boomers age, and younger generations consume less alcohol. A report by Silicon Valley Bank predicts a negative growth in wine sales volume between 1% and 3% in 2024. This trend particularly affects smaller, family-owned wineries and farms in California, as explained by John Duarte, a former Republican Congressman and family farm owner. He notes that larger alcohol corporations, which both import and export wine, might not suffer as much due to U.S. Customs and Border Protection refunds on certain duties.
Duarte expressed concerns that the tariffs could encourage big alcohol brands to increase European imports at higher costs to maximize export refunds, possibly disadvantaging smaller producers. “At first, you want to be thankful that President Trump is standing up for the domestic wine industry,” Duarte stated. “But this 200% tariff on top of other excise and tariffs that are in place already is a giant advantage to the global wine companies that do importing and exporting from the United States.” While acknowledging the need for fair trade practices, he cautions against the potential negative consequences of such tariffs.
Not all Californian winemakers share this pessimism. Bruce Lundquist, co-founder of Rack & Riddle, the largest U.S. sparkling wine producer, is hopeful that the tariffs might increase interest in local products. In 2023, France exported nearly 27 million bottles of Champagne to the U.S., making it the primary export destination for this beverage. Lundquist noted that a 200% tariff could significantly harm the import market for Champagne, but might boost domestic sparkling wine sales. “Nobody wants a trade war,” said Lundquist. “But it would probably boost business for domestically made sparkling wines.”
CNN’s David Goldman contributed to this report.
Your Takeaway
The proposed tariffs could have a multifaceted impact on the wine industry and consumers. For American wine producers, especially small and family-owned operations, the tariffs might offer a chance to gain a competitive edge over European imports. This could potentially lead to increased sales and a stronger focus on locally produced wines, benefiting the local economy and creating job opportunities.
However, the broader implications of a trade war could adversely affect international trade relationships and supply chains. Consumers might face higher prices for imported wines and reduced variety in their selections at restaurants and stores. Additionally, the potential for retaliatory tariffs could further strain the already fragile industry. As trade tensions evolve, both producers and consumers will need to navigate the complexities of the changing market landscape carefully.
