Euro wine companies fear consequences of wine tariffs

25% duty goes into effect next week, but only for wines with under 14% alcohol

11 October 2019

From various news sources

I have obtained press releases from various wine companies in recent days to react to President Donald Trump’s recent tariff on European wines that will take effect one week from today, 18 October.

As Eric Asimov of the New York Times recently reported, the duties will not affect sparkling wines. And they will only apply to wines with alcohol levels below 14%, which will hit producers from regions like Sancerre and Chablis hardest.

As alcohol levels for wines have been going up, generally speaking, many Bordeaux producers (but hardly all) – can breath a sigh of relief. As can producers in Châteauneuf du Pape, I suppose.

For lovers of lower alcohol wines, made in Europe? Well, this sucks.

Indeed, many companies, too, are worried. Because the US represents a significant market for them, and because of its good economy, it has become a main focus for international development.

Take for example French online wine auctioneer iDealwine, which is  “very concerned” over the 25% ad valorem import duty, the result of a long-running dispute with the EU over airplane subsidies.

As some have already noted, wines with already rather lofty price tags likely will still sell, as affluent buyers can take the hit. Although, even for this category, an increase in price will slow down purchasing. Wine that will have the hardest time it seems would be the category of under $15 retail bottles that face fierce international competition. Competition that does not have to deal with this tariff.

In any case, if nothing is done to prevent the United States imposing tariffs of 25% to French, Spanish and German wines, the consequences could be severe for wine industry professionals such as iDealwine.

“In Europe, France is second only to Italy in terms of quantity of wine (in containers of less than 2 litres) exported to the US”, the FEVS (Federation of Exporters of Wines and Spirits) stated in a press release. What’s more, while the aeronautic industry represents France’s first trade surplus, wines and spirits are in second position. The decision is very significant for foreign trade.

While for now the USA represents only a small portion of iDealwine’s annual turnover (<5% in 2018), it is one of their most dynamic markets and main area of focus for international development in the years to come, according to a press release from the company.

“The market is mature and highly knowledgeable. Americans were among our first non-French customers to buy wines such as Clos Rougeard, naturalwines, wines from the Jura… Given the constraints that already exist when it comes to importing, our progress on this market has been slow but sure; it has shown itself to be very reactive and dynamic. Our turnover increased by 62% between 2018 and 2019 (January-September). This success has led us to dedicate a development project focusing on the region. For example, we will be participating in the New York wine show Matter of Taste organized by The Wine Advocate (formerly Robert Parker). The next step would be to open an office in New York, just like we did in Hong Kong in 2013 – which then went on to become our top buying country after France. We had planned to make various investments and recruitments to develop growth. This supplementary tax of 25% for wines headed to the US forces us to seriously question these projects. For now, we are waiting to hear the reactions of our American customers. We sincerely hope that the French government will support us by continuing negotiations with the United States, so as to reestablish normal trading conditions”, Cyrille Jomand, CEO of iDealwine, explained.