The wine industry as we know it is in danger, experts fear.
Last fall, the Trump administration levied a 25 percent tariff on wine imported from France, Spain, England, and Germany – a tax that U.S.-owned importers, distributors and retailers and not European companies have to pay.
And this fall, that tariff could increase to 100 percent – prompting Ben Aneff, president of the U.S. Wine Trade Alliance and managing director of New-York based retail wine store Tribeca Wine Merchants to make a dire prediction.
Calling the prospect “the greatest threat to the wine industry since Prohibition,” Aneff warned:
“Without a doubt, if you put a 100 percent tariff on all imported wines, it would cause a staggering, cascading number of job losses across the U.S. wine industry.
Added Elizabeth Gerlach, general manager of Chandler-based wine and spirits purveyor, Quench Fine Wines: “The entire wine industry would be at risk.”
“The impact of a 100 percent tariff would be devastating to the wine industry, resulting in loss of jobs, folding of companies and a combination of higher prices and less of a selection to consumers,” Gerlach said.
Quench’s business is made up of roughly 70 percent imports, so their business would be “severely threatened,” she added.
Both Shepherd and Todd Sawyer, owner of Scottsdale wine shop AZ Wine Company – which is attached to his BYOB restaurant, Atlas Bistro – are already feeling the effects of the 25 percent tariff, including increased wine prices.
About 40 percent of the wines sold at AZ Wine Company are imported from France, Spain, England, and Germany.
“These are really key products for us. Consumers demand them,” Aneff said. “You couldn’t pick a worst time to do it, in the midst of this COVID-19 pandemic, when these companies are absolutely reeling.”
During the first month since the 25 percent tariff was implemented, U.S. imports from France alone fell $35 million compared to the same month in 2018 — “resulting in nearly $30 million loss in profit and taxes in the U.S.,” Gerlach said.
Overall, Aneff said the tariffs on European wines are expected to cost about $10 billion in lost revenue and 78,000 job losses across the nation’s 47,000 wine retailers and more than 6,500 importers and distributors.
“There’s tremendous struggle,” Aneff said of wine businesses already in deep water due to the COVID-19 crisis. “Large numbers of U.S. distributors have laid off staff, [and] some have furloughed huge percentages of their staff – upwards of 50, 60, 70 percent.”
It’s these distributors, in particular, that would be most at risk should tariffs continue or increase.
“All these wine teams are getting destroyed, as far as the distributors,” Sawyer said. “If you couple that with a 100 percent increase in pricing, we’re going to have a serious amount of consolidation. I think all the small distributors are not going to survive this.”
For now, the 25 percent levy remains until August, when it is set for review.
Until then, Aneff encourages the public to comment on the issue in emails to the U.S. Trade Representative.
“They should tell the U.S. Trade Representative: 'Scrap the tariffs on wine products because they disproportionately harm American businesses. They should put the tariffs on products that ensure the damage stays in the EU, where it should be,'” Aneff said.
Gerlach and Sawyer also recommend writing letters to Arizona Senators Martha McSally and Kyrsten Sinema.
“All voices in opposition to wine tariffs count,” Gerlach said. “Ask them to stand up against retaliatory wine tariffs.”
Ryan Shepherd, managing partner at Phoenix-based Action Wine & Spirits, said, “The public should be concerned about any trade policy that stifles free markets, limits consumer choice, favors establishment over fledgling, and misses the intended target altogether by landing the financial impacts of said policies squarely in the laps of American businesses and American consumers.”
The 25 percent tariff originated over a dispute regarding aircraft manufacturing subsidies.
At the time, a separate 10 percent tariff was levied against Airbus, the European aircraft manufacturer that competes directly with Boeing.
“We completely appreciate the position the U.S. Trade Representative is in terms of needing to resolve this Airbus issue, but they will be significantly more successful doing so if they put the targets on the source of the problem, which is Airbus,” Aneff said.
Shepherd describes the impact of the tariffs as having a ripple effect.
“If we as U.S. consumers refuse purchase of these products at their new price points – and we will – other global markets will gladly absorb them, along with dissolving the decades-long relationships forged between U.S. importers and EU wineries that make it possible for us to have access to these historic wineries,” Shepherd said. “To many, these relationships are like family.”
This, in turn, puts hundreds of thousands of import, wholesale, retail and restaurant jobs at risk.
“These are low-margin, passion-driven professions. Tariffs in this sector aren’t sticking it to the man, and tightening the belt isn’t really an option — especially with how COVID has devastated our industry,” Shepherd continued.
Domestic wineries are then negatively affected by the tariffs on EU imports, “and wineries across the U.S., many of whom are farmers, are also dependent on a healthy, robust network of wholesalers across the country to market their products for them,” Shepherd added.
Shortly after the tax implementation, Sawyer, Gerlach and Shepherd, among other representatives from several locally based, mid-sized distributors, met with McSally and Sinema in January to raise awareness of the tariff’s impact on Arizona businesses.
“Our hope is for them to understand the negative effect the tariffs will have on our local economy and support this non-partisan issue by carrying the message to their fellow policy makers in Washington D.C.,” Gerlach said.
McSally and Sinema can be reached at 602-952-2410 and 602-598-7327, respectively.
“Quench is passionate about fine wine, and we have worked diligently for nearly two decades to curate a vibrant selection of wines to the Arizona market,” Gerlach said. “It would be a shame to forfeit that hard work because of a dispute that has nothing to do with our industry.”