North Coast wineries line up against Trump proposed tariffs on European wines

As the Trump administration considers imposing tariffs up to 100% on a vast majority of European wines, the North Coast wine sector voiced strong opposition to the proposal, fearing an escalating trade war that would hurt both sides.

The Office of the U.S. Trade Representative on Monday ended the period of public comment over its plan to tack on additional duties on a large swath of French products - such as wine, cheese and designer goods - in retaliation on a French digital services tax of 3% passed in July that affects American companies such as Facebook, Amazon, Apple and Google.

“Instead of putting tariffs on unrelated products, like wine and sparkling wine, the U.S. and EU should increase their efforts to resolve these serious trade-related problems between them so the unrelated trade in wine products are not unintentionally harmed,” wrote Michael Haney, executive director of the Sonoma County Vintners trade group.

American vintners ultimately expect retaliation by the European Union, the largest export market for them with $469 million in caseloads shipped out in 2018. Conversely, EU wine exports to the United States in 2018 were worth $4.1 billion, making America its largest foreign market.

Warning shots already have been fired in the transatlantic dispute. In October, the Trump administration issued a 25% tariff on European products that included bottled table wine from France, Spain, Germany and the United Kingdom. During that first round, sparkling and bulk wines, Italian wine and varieties with an alcohol content under 14% were not included in the levy. Sparkling, Italian, and high alcohol wines are on the table for the next round of tariffs.

That initial action was in response to government subsidies to aircraft manufacturer Airbus, which gives it an advantage over its American rival Boeing. The administration has another proposal that would put additional tariffs on European products such as wine beyond France in retaliation to the Airbus dispute.

There are concerns of other ripple effects, especially among a U.S. wholesale sector undergoing tremendous consolidation. Fine wine distributors who import from Europe would be placed under financial strain, which would have an effect on U.S. wineries they represent.

“Our distributors (small businesses) all import French wines as a necessity to be differentiated in the market and the tariff will be devastating for their companies, which in turn will limit/reduce our sales in the US. You are fighting fire with alcohol,” wrote winemaker Donald Patz, the owner of Donald Patz Wine Group in Yountville.

Retail stores also are bracing for the ill effects, especially since they could lose stock on the shelf. Roughly 13% of the wine stock at Wilibee’s Wine and Spirits in downtown Santa Rosa comes from France.

Owner Vikram Badhan said uncertainty over whether the prices actually will go up is the most disconcerting aspect - and it is affecting his buying decisions. He worries that if he buys wine at the higher tariff rate and then it would be reduced, he would be stuck with an overpriced product that he could not sell to make a profit.

“As a small business owner, it’s one of the hardest things to wrap your head around,” Badhan said.

Bottle Barn likely would drop some European producers from its portfolio because it would be hard to sell a Burgundy wine that now lists for $200 for $400, said Barry Herbst, wine director for the Santa Rosa store. The effect would be especially significant for French champagne, which has been a consistent strong seller in recent years.

“If this 100% proposal happens, it will be a huge game changer,” Herbst said.