Chris Renfro at his retail wine establishment Friend of a Friend in San Francisco, Oct. 22, 2024. President-elect Donald Trump claims that tariffs will support American manufacturing and generate employment, but numerous economists and trade analysts contend that tariffs could lead to elevated costs and harm American enterprises. (Carolyn Fong/The New York Times)
By SETH KUGEL
The wine industry is preparing for the likely impact of the tariffs that President-elect Donald Trump has mentioned imposing on most imported goods entering the United States.
Trump insists that the tariffs will benefit American manufacturing and create jobs. However, many economists and trade specialists argue that tariffs could lead to increased prices and harm American enterprises, with the American wine sector potentially facing significant repercussions.
This would mark the second occasion Trump has enacted tariffs on wine. In October 2019, he introduced a 25% tariff on numerous European foods and beverages in retaliation for the European Union’s subsidies to Airbus, the European aviation manufacturer. This tariff inflicted considerable damage on the American wine industry, which was later lifted by President Joe Biden in 2021.
Now, Trump has discussed tariffs between 10% to 20% on most foreign items and 60% or more on Chinese products. These tariffs would not only elevate the prices of imported wines but could also lead to increased costs for domestic wines if distributors hike prices to recover losses incurred from foreign goods. They might adversely affect businesses across the entire industry, including farmers, producers, importers, distributors, retailers, restaurants, warehouses, shipping companies, as well as label and bottle manufacturers.
Many of these businesses are small, American-owned enterprises that already operate on thin profit margins and lack the means or resources to endure prolonged financial setbacks.
“Wine is incredibly vital for American small businesses, more than almost any other product,” stated Ben Aneff, managing partner of Tribeca Wine Merchants in New York and president of the U.S. Wine Trade Alliance, which advocates for a free-trade environment for wine.
He explained that the American alcoholic beverage industry is unique due to its legal requirement of a three-tier system. In this system, producers of wines, such as those from France, must sell to an importer, who then sells to a distributor, who ultimately sells to a retailer or restaurant. Aneff noted that American businesses make $4.52 for every dollar spent on European wine.
“Most of these businesses are small and family-owned, meaning the bulk of the revenue remains within American businesses,” he remarked. “That’s why these tariffs are an ineffective solution to influence European behavior.”
This year, Trump has framed his tariff suggestions as advantageous for the American economy rather than retaliatory actions against European practices. It’s worth noting that European wine producers may not be gaining significantly from American sales; many are small family operations that might struggle to adapt if, for instance, American importers were to purchase fewer bottles or seek price adjustments to compensate for tariffs.
“It’s not beneficial for them,” stated Zev Rovine of Zev Rovine Selections, an importer and distributor in New York. “They are already contending with climate change and a tough market. A significant market fluctuation would be a severe setback.”
Patrick Cappiello, owner of Monte Rio Cellars in Sebastopol, California, which produces reasonably priced wines, has been a strong proponent for American wines through his Instagram platform. Nevertheless, he is conflicted regarding tariffs.
On one hand, he noted that increasing the prices of European wines—which, for various reasons, often cost less than comparable American wines might benefit American producers. Yet, he acknowledges the detrimental effect it will have on American businesses.
“I have concerns,” he expressed. “The majority of the distributors for my wine in the U.S. are also wine importers. They will suffer, and that’s detrimental to me. The downside is, it doesn’t decrease the prices of American wines.”
Many in the wine industry doubt American wineries will gain from this. For starters, quality wines are not interchangeable; they are unique products shaped by the soil, climate, and culture of their origin. For example, a chardonnay from Chablis in France will differ from one produced in California, and many foreign wines don’t have American equivalents.
Mary Taylor, an American importer, sources wines from small family farms in Europe that she sells under her own Mary Taylor label. She believes tariffs would be detrimental to small producers and diminish the variety of wines available to American consumers.
“There’s no magliocco from Calabria here,” she proclaimed, referencing a red grape cultivated in Italy’s Calabria region. “There’s no way to replicate that. It’s just going to render all wines more expensive and more standardized. The major players will dominate, leading to the closure of small producers.”
Interestingly, Taylor mentioned that Mar-a-Lago, Trump’s club and residence in Florida, includes Mary Taylor Bordeaux Blanc on its wine list. “Trump supporters enjoy wine as well,” she noted. “They don’t want to see it ruined.”
Due to the alcohol distribution system, tariffs will impact wine more significantly than they would, for instance, a French luxury handbag brand, as there are more small American-owned businesses involved in the wine sales and distribution chain.
Aneff cited the example of handbags from foreign luxury brands, where relatively few American businesses would be affected.
“Chanel can create, produce, and open a store on Fifth Avenue or set up a kiosk in Macy’s, selling everything themselves,” he mentioned. “They capture 100% of the revenue, while for a large number of French products, the earnings go straight back to France.”
“We acknowledge there are challenges, but wine is not one of them,” Aneff insisted. “Let’s not disrupt it.”
Some retailers and restaurants may opt to stockpile additional wine before Trump assumes office and before any tariffs become effective. Grant Reynolds, owner of three Parcelle establishments in New York, which includes a retail venue and two wine bars, mentioned he has already been approached by importers proposing to sell him extra wine.
This is a potentially precarious approach. Businesses are already well-prepared for the final quarter of the year, the peak time for wine and spirits sales. They might end up with surplus stock in the slow first quarter of the subsequent year. Alternatively, like Bufalina, they might lack the capacity to accommodate extra bottles.
“This isn’t merely a concern for wine drinkers — the effects will be felt by restaurants,” Reynolds noted. “They are interconnected systems of labor, rental costs, and wine and food expenses. If one aspect gets disrupted, the other must adjust. Reduced staffing or lower-quality food ingredients may result.”
In the worst-case scenario, consumers might reduce wine consumption or switch to alternative beverages like hard seltzer or cocktails. This would pose a challenge for restaurants such as Bufalina that lack a liquor license and won’t benefit the American wine sector.
“If tariffs cause people to drink less wine,” remarked Cappiello, the California winemaker, “it benefits no one.”
