Ideal Wine Company - US wine tariffs

Are US wine tariffs on European produce the new normal?

Despite media speculation over the past few weeks over whether the US would impose its threat of 100% tariffs on European wine, it hasn’t happened. The US says it won’t be expanding the existing tariffs already in place against European wines at the moment.

Wine tariffs already in place on European wine

There is already a 25% tariff from the US on some Spanish, German and French still wines. However, the US trade representative has said that, after a review, no more will be added, and existing tariffs won’t be raised.

While it’s good news that the 100% tariff threat has reduced, it’s also likely that the existing 25% tariffs will stay. This is also likely to be the case even if Mr Trump loses the Presidential election in November 2020. This means that European wine producers, wine importers and consumers will have to get used to the higher prices.

This is because these tariffs are a result of a long-running trade dispute over European subsidies to American company Airbus. The dispute goes all the way back to 2004, and it’s also worth remembering that the US had to get permission from the World Trade Organisation (WTO) to impose the 25% tariffs. In other words, it wasn’t a unilateral decision.

Given all of these factors, it was unlikely that the 100% tariff threatened by the President would ever become a reality. This would have pushed tariffs way beyond the numbers that the WTO approves, meaning that the US would forfeit international approval for its position.

Could a new President reverse tariffs?

And while a new President could change many US policies introduced over recent years and would likely do so very quickly after taking office, this could stay regardless of who comes not office.

Results so far show that the tariffs have caused problems in France, with exports to the US dropping by almost half in 2019, according to Jean-Baptiste Lemoyne, the deputy French Foreign Minister. The vice president of the French national syndicate of independent winemakers, Cedric Coubris, told Wine Spectator that 600 of its members showed loses equating to almost $22 million in 2019. The loss is expected to be around $110 million in 2020, forcing some wine producers in France to shut down.

The US market has always been exceptionally important to French wine makers, due to the value led sales. Other countries such as the UK and Germany bought more in volume than the US, but always cheaper wines. The US traditionally spend more than three times more than China on French wine, although far fewer bottles. This makes the US the most important global market for premium and fine wine.

French producers are trying other avenues to sell more premium wine, but the outbreak of the coronavirus in China has complicated this plan. According to a story in Wine Spectator on 10 February, French winemakers and merchants are demanding $327 million compensation from the EU and the French Government. They say that the damage inflicted on their industry by the tariffs is a result of a political dispute between the US and France, because of the French Government’s decision to subsidise Airbus. And it can be speculated that this is what the USTR wants – the EU to cease the subsidisation of Airbus. Whatever happens, it’s likely that everyone in the US wine industry, and consumers who love drinking wine, will have to adjust to higher prices for German, Spanish and French wines.