Perspectives on the US wine tariffs

The regions most affected are Rheinhessen, Mosel, and the Pfalz, and we have already felt an impact on our sales. It’s not yet possible to express in figures, but we know there is a considerable decline in exports to the US. We can see the numbers are going down but as the market was already quite difficult in the last months, the effect is not really visible in the statistics. But for some of our producers the effect is already very high: many producers fear for their existence because of the trariffs.   

The Covid-19 crisis is not good news for the China market, or for any of the different markets in Europe. We asked for a compensation fund from the European Commission for the US tariffs, but it is very difficult because now every sector is concerned about the coronavirus crisis, so it is not possible to have a compensation fund for wine growers for the US problem.

In the short term there are consequences, and even if we no longer have the punitive tariffs, it will be difficult to recover quickly. If a wine is removed from an importing list it will be very difficult to re-enter the US market. The US is a very complicated market, and you must do a lot of work to enter it. So I think even if we have a good decision in May that will remove the tax, the consequences will last a long time and it will take a long time for our producers to recover.

Caryl Panman, owner, Chateau Rives-Blanques  
Cépie, France 

What you have to remember is that we are a very small vineyard. We’re only 20 hectares, so we’re not dealing in big numbers at all. We’re just little people on a big stage.   

I was organizing a trade fair for Vinifilles, an association of female winegrowers in Languedoc-Roussillon, to do a small wine trade fair in New York in April. Then the 25% tariffs were put on wines under 14% alcohol, which affected us all. We spoke to our importers who all reflected a sense of general uncertainty; people were not chomping at the bit to explore and discover new wines, so we decided to cancel the fair. But then recently I spoke to the head of the Maison de l’Occitanie in New York and they had a trade tasting there for importers a few weeks ago. I asked how it went and she said it was fantastic, that there was a lot of interest and people were happy to have the producers there to show their wines. So I think we’re too close to it, to be able to tell what the repercussions are, for us, for the small guys.

But I really feel sorry for the American consumers. We can’t be expected to carry the extra 25%, nor can the importer be expected to carry it, so I wonder: who will carry it? The other thing I feel sorry about is from the Senate hearing, the report in Washington DC where importers went as voluntary witnesses to tell about what the 25% tax and any further tax would do to the American wine industry. To me that was illuminating to read because it was so clear that the Senate committee knew so little about how the American state-to-state licenses work, had so little idea of the sense of terroir, and how a Chardonnay from California is quite different from a Burgundy or Limoux, because it’s terroir and it can’t be transplanted. The tariffs are depriving the American consumer. It was really quite alarming, I thought.

Charles Woods, owner, Bonhomie Wine Imports
South Orange, USA

It’s been extremely challenging and continues to be. We knew the tariffs were coming several weeks before they hit, and we were able to adjust pricing, contact our suppliers and ask them for relief in terms of what they were charging us for the wine. Some of our suppliers were able to see the wisdom of giving us a 10% discount on the prices we were paying them so that they could cover a little bit of the cost of the tariffs, and we could cover a little bit, and we could maybe raise the prices a little bit. To extend the business relationship was more important than the profit.  

But not every winery is going to be able to do that. And some have said they can do a little bit with one wine, but they can’t do anything with another wine. There are some suppliers who didn’t feel like they really could make any concessions, pricewise, and with those wines the prices just have to go up to the point where many of them won’t sell. Eventually some hard decisions will have to be made, but many of these suppliers are people that I’ve been working with for over ten years, and who are true friends. We’re going to try to make it work, but I can’t take a basic entry-level Riesling from the Rheingau, which people are used to buying at $160 a case, and raise the price over $200 a case, that’s just not going to fly. It’s not going to be a reachable price-point for restaurants to pour by the glass, and consumers are going to see that their favourite Rheingau Riesling is just not in that price-point where they like to spend their money, and we’re just not going to sell as much wine. So you make an assessment as a person with experience in the business, and you look at all the attributes and aspects of a wine including quality and whether it’s a value, and if it’s not a value to the consumer, I’m not in the practice of buying that. It just doesn’t make any sense.

John Bojanowski, winemaker, Le Clos du Gravillas
Saint Jean de Minervois, France

The first impact is that we haven’t sent any wine to the US since the tariffs were put in place. There should be a little bit of wine going out soon, but maybe the coronavirus will knock that out, too. The tariffs have slowed down business for our category of not-inexpensive French wine, so developing new business has become more difficult. And now the coronavirus has just stopped the momentum to get a new shipment of wine over there. Right now, we can’t really do much of anything at all except work in the vineyards. 

I wasn’t particularly worried, coronavirus notwithstanding. We normally can sell what we would have sold in the States somewhere else. For example, we’ve started working more with Sweden. And the Australians, who didn’t buy last year because of the fires, need more wine now. We’re small enough and established enough that if it doesn’t go to the States it will go somewhere else.

But that said, if we stop selling to the US completely, or stop selling to the US for even a couple of years, what we’ve worked relatively hard to establish over the last 20 years will become un-established. 

Our importer hasn’t gone out of business yet; it’s very small, but they’ve been in business for over 30 years, and are just hunkering down and taking care of selling the wines they have in stock. They’ve got some lower-end wines, some co-operative wine from Italy and France, and they’ve been able to make those price points work. But for our wine it was, “okay we’re going to wait to see what happens”. What also killed things was waiting to see if the 100% tariffs were going to kick in. When they didn’t it would have become possible to start sending wine out, but then coronavirus happened. Now we’re back in “wait and see”. 

Interviews by Jason Sych

This article first appeared in Issue 2, 2020 of Meininger's Wine Business International Magazine, available online or in print by subscription.