Six things to know about the suspension of the European wine tariff — and why they’re almost all good
by Wine Curmudgeon Posted On
The WC was dead wrong about the European wine tariff, and he couldn’t be happier
The United States and the European Union have agreed to a four-month suspension of the 25 percent European wine tariff, part of a larger suspension of all the tariffs that are part of the decades-long dispute over subsidies to aircraft behemoths Boeing and Airbus.
So six things to know about the temporary halt to European wine tariff — and almost all of them are good. Because, as Gregory Doody, the president and CEO of importer Vineyard Brands, told me: “The suspension of these ill-advised tariffs is going to be a very, very welcome relief for us and our industry, which has been so hard hit by the coincident blows from the tariffs and the coronavirus pandemic. … This dispute never had anything to do with us, but much of its burden fell on us.”
Consider the following:
• The Wine Curmudgeon was wrong, wrong, wrong – and it makes me feel terrific to admit it. Of course, I wasn’t the only one who didn’t expect this. Just three weeks ago, no less than The Wall Street Journal wrote that the tariffs were here to stay “despite intense lobbying by the U.S. restaurant and beverage industries that are already reeling from the Covid-19 pandemic.” In fact, I don’t know that anyone thought we would see a possible end to the tariff just six weeks into the new administration.
• Yes, a suspension is not the same thing as ending the tariff. But it’s close enough. The key here is that both sides have agreed that if four months isn’t long enough, then they’ll continue talking. That they’re willing to go that extra step speaks volumes about how serious the U.S. and EU are about ending this foolishness.
• Prices for French, Spanish and German wine should drop sooner rather than later. How soon? It depends on where the wine is in the supply chain. If it was ordered last month, its price won’t drop, since it was ordered when the tariff was in effect. But if it‘s ordered next month, all those $10 French roses should be $10 again.
• And I can’t shake the suspicion that the suspension had more than a little to do with the start of rose season in a couple of months. Rose has become a key French export, and it’s also important for the Spanish wine business. This had to move the EU closer to compromise.
• Wine is not necessarily the biggest winner here. That’s the spirits business, which was taxed by both sides in the dispute. In the U.S., distillers have faced thousands of job losses and millions of dollars in lost business, while trade groups in Europe counted as much as 35 percent in lost sales.
• The biggest winner? Diplomacy, compromise, and common sense. And that may be the best news, in which we get a glimpse of a world where policy prevails over an ideology that revolves around adults who pout like small children.
“” I can’t shake the suspicion that the suspension had more than a little to do with the start of rose season in a couple of months.” I have my doubts about that, but you never know. I was not looking forward to rose prices that would be even higher than last year. I saw a price list for one importer’s 2020 French roses, and I was shocked when I realized what the retail prices would be.
I do not think that when the wine was ordered is the point here.
It will have more to do with when the wine was shipped or when
the customs papers for entry into the country are filed.
Normally this should be straightforward one or the other, but I
remember that back in the 1970s when a tariff was lifted, Customs
came after the importer I worked for months after the fact and
wanted to collect tariff on wine that had be shipped before the
tariff was lifted, but that landed after that.
It was a fiat of the Treasury Department and I do not remember
how it was settled.
The point is that when the wine was ordered, should not come into
the equation.
One interesting point is that a lot of suppliers gave importers discounts
during the tariff period to help the hold their prices down. Some orders
with discounts will also come in without the tariff, so that the wholesalers
will have a special dividend.
In some cases our wholesalers, with the help of these discounts, held their
prices while paying the tariffs. On those goods, the prices they charge will
probably not change at all. In other cases, where discounts and lower margins
meant smaller than 25% price increases, the prices will not drop by the full 25%,
but might see some downward movement or an increase in promotional money.
The great thing is that we will be able to sell Burgundy again and also that we can
restock wholesalers who cut back their buying during the tariff and COVID with
Cotes du Rhone, Bordeaux, and all the rest.