The Trump administration has proposed a tariff up to 100% on European wine in response to France’s digital service tax, a move that would destroy a large portion of the American wine industry, which imports significantly from Europe.
On Wednesday, members of the wine industry came to Washington, DC, to plead their case that the tariffs would badly hurt American businesses and consumers. Consumers traditionally bear the brunt of tariffs, and research from the New York Fed showed that this time is no different: U.S. consumers and companies have had to foot the bill.
The new tariffs, which would hit a wide range of French goods, are expected to take effect in mid-January.
The damage of new tariffs of this magnitude, which would be on top of 25% tariffs from October after a spat about Airbus, would have existential effects on the industry, hurting jobs and the availability of popular beverages.
Already, the 25% tariffs have had a chilling effect on American wine importers, who have been eating the costs and begging producers to bear with them instead of simply selling to China or Russia.
“If 100% tariffs are placed on EU wines it will cause a severe disruption to the U.S. wine industry, including the quick demise of numerous American importers,” Tom Wark, executive director of the National Association of Wine Retailers, told Yahoo Finance. Wark also said retailers will see “a significant erasure of revenue.”
‘Death by a thousand cuts’
While American wines are as good quality as wines from anywhere else, they’re simply different things.
“No president or lawmaker has ever contemplated this kind of action for the simple reason that it harms American businesses and consumers in such a severe and unproductive way,” Wark said.
Consumer harm is clear; hefty tariffs are almost always passed onto consumers in the end.
Lorena Ascencios, wine buyer at Astor Wines in New York, told Yahoo Finance that the tariffs will hit entry-level wines (under $15 per bottle) especially hard.
“Great European entry-level wines are endless and inexpensive to buy which allows us to sell the bottles for an excellent price,” Ascencios said, noting that a bottle that cost $6.99 might not be as appealing to people if its priced doubles.
But the effect on the small businesses involved would be especially dramatic.
Greg Rubin, the owner of Vanderbilt Wine, a small shop in New York, told Yahoo Finance that the current tariffs haven’t caused him to change his business yet, as some importers and producers absorbed the higher costs to keep prices stable.
Rubin said that if tariffs were implemented, stores like his would have a few weeks until current inventory was gone and replace it with non-tariffed products in the short term.
In the long run, Rubin said that the prices of American wine would go up, and that would likely pinch stores like his sell luxury items (wine may be food in France but it’s a luxury to most U.S. households) as customers are price sensitive.
“If the tariffs remain in place for long enough those who have made the ‘right’ decisions will remain,” Rubin told Yahoo Finance. “But for many, it will be death by a thousand cuts.”