Trump to slap tariff on French wine
The trade war gets real! As if tariffs on hundreds of billions of consumer goods made in China weren’t real enough, the latest escalation from the Trump administration has found a new target: French wine.
Late yesterday, word came down that the Trump administration will impose $7.5 billion in tariffs on goods from our European allies. The impetus is subsidies to the plane consortium, Airbus, which is backed by France, Spain, Germany and the UK. Thus the tariffs affect symbolic goods from those countries, including all wine, olive oil, whisky and some camera parts. The long-simmering dispute entered a new phase yesterday as the WTO ruled in favor of the US. Hopefully there will be a negotiated settlement but as announced yesterday, the levy will be imposed on all goods on the list that enter the country as of October 18.
The fourth quarter of the year is by far the biggest quarter for wine sales. Many of the wines that will be sold during that time are already in (climate controlled) warehouses on our shores. But not all. If these tariffs become reality, it remains to be seen how importers of French and Spanish (and German and British) wine will adjust prices in the near term. But, if these tariffs linger, prices for these wines will inevitably rise sharply in the new year. It is worth noting that tariffs are paid by importers, not the producers (although in some instances, importers may request producers share the pain to mitigate price increases but with a tariff this large, there’s not a lot they can do other than see prices on store shelves rise and placements on wine lists decline.)
Wine is highly symbolic of France. Thus, it has been the subject of protests and over time, such as in New Zealand over the Rainbow Warrior or in 2003 over the Iraq war. (See the wines served at Macron’s state dinner.)
France was the biggest supplier of imported wine to the US market, sending $2.1 billion of wine to the US in 2018. Spain was fifth with $383 million, Germany ninth with $103 million, and the UK 14th with $16 million in wine (!). [source]
Clearly, the biggest winners here are domestic wineries, which provide two of over three bottles of wine consumed in America. Italy, the second largest provider of imported wine to the US, is not hit by the tariffs since they do are not a part of the Airbus consortium. As such, they stand to benefit greatly and the Italians, New Zealanders, Chileans and Australians are probably slack-jawed at this opportunity that has been handed to them.
If the tariffs indeed get imposed, how long they remain in place is an open question. So far, Trump has not rolled back any tariffs against China, so it is entirely possible that the only way for the tariffs to be removed is when there is a new occupant of the Oval Office.
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