Digging Deep into the Wine Tariff Wars With the EU

We all deal with uncertainty in our lives and We all like to think we can overcome it.

When facing financial uncertainty, we tighten our belts and attempt to weather the storm. And a glass of Chianti Classico helps mellow our stress and tension.

When facing health uncertainty, we heed our physician’s medical advice to minimize or eliminate the potential consequences. And a glass of Sancerre helps mellow our stress and tension.

When facing social uncertainty, we strive to interact with others to reduce family friction, mitigate career crises or minimize political upheaval. And a glass of Champagne helps mellow our stress and tension.

But what happens if wine is no longer the readily accessible crutch that gets us through uncertainty? How do we deal with uncertainty if wine becomes the uncertainty, not the comfort resource on which we rely?

Such an uncertainty has been in the news for several months, and the situation now seems to be escalating.

In October, in response to a murky dispute over the European Nation’s (EU) role in the Boeing/Airbus matter before the World Trade Organization (WTO), the United States imposed 25 percent tariffs on select products, principally wine, exported to the United States from EU countries that historically have been subsidizing Airbus. Affected wines include those under 14 percent alcohol by volume from France, Germany, Spain and the United Kingdom. Higher alcohol wines and sparkling wines were inexplicably excluded from tariffs.

On Dec. 2, in response to a French tax imposed on the largest American technology companies, the United States threatened to increase the October tariffs to 100 percent on all French wines, cheeses and numerous consumer goods.

Then, on Dec. 12, in response to a WTO report stating the EU was not in compliance with a provision of a Boeing/Airbus dispute, the U.S. threatened to expand and increase tariffs on EU exported products. The potential 100 percent tariffs, which are slated for mid-January, affect all wines from all 28 EU members and are expanded to all of its produced cheeses, olive oil, whiskey and other consumer products.

What does this convoluted, somewhat arbitrary, set of import taxes looming on the horizon portend for the American wine industry and ultimately the American consumer?

Plenty.

 Impact on the wine industry

The impacts of the 25 percent tariffs were borne by the wine distribution chain. Importers, distributors and retailers absorbed the costs without impacting retail prices in the hopes of maintaining market share. This is shielding the American consumers – for the time being.

The immediate uncertainty of the tariffs and their duration will strain the financial wherewithal of those in the wholesale chain. Consumer resistance to price increases, made inevitable by prolonged tariffs, may drive many wineries, importers and retailers out of business. American producers might seize on this change in pricing dynamics. Increased prices, without commensurate cost increases, would result in a boon for them. But would consumers resist the new price points for American wines?

 Impact on consumers

There is just so much the wholesale and retail chain can absorb. Imposing 100 percent tariffs are a game changer.

If they are imposed, all bets are off. Prices on European Union wines will increase exponentially. Consumers will be forced to make difficult choices. Pay prices beyond their comfort level? Beyond their resistance point? Or revert to lower priced wines they previously avoided? Seemingly, this would make certain American wines more attractive.

Or maybe not.

Consumers tend to be creatures of habit. Finding a wine they enjoy, they typically become loyalists. But price-point resistance is a powerful purchasing dynamic. Gravitating from EU wines, will they invest in inflated American wines or seek out lower tier wines to the detriment of their (previously) favorite wines? Or join the growing wave of alcohol abstainers?

If you feel strongly about the tariff issue, I encourage you to communicate with the U.S. Trade Representative’s office (https://tinyurl.com/wtpw2q4) and/or your congressional representatives (www.usa.gov/elected-officials).

We face uncertain situations each day of our lives. And each face unpredictable impacts.

What will the outcome be? Only time – and fractious international relations – will tell.

Nick Antonaccio is a 40-year Pleasantville resident. For over 25 years he has conducted wine tastings and lectures. Nick is a member of the Wine Media Guild of wine writers. He also offers personalized wine tastings and wine travel services. Nick’s credo: continuous experimenting results in instinctive behavior. You can reach him at nantonaccio@theexaminernews.com or on Twitter @sharingwine.