Tag Archives: wine tariffs

Six things to know about the suspension of the European wine tariff — and why they’re almost all good

wine tariff
This 1-liter bottle of French rose, about $12 before the tariff, should soon be $12 again.

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.

studio microphone

Winecast 57: Patrick Mata of Ole & Obrigado and imported wine during the pandemic

patrick mata
Patrick Mata, right, and Alberto Orte of Ole & Obrigado. “American companies are paying the tariff. How does that punish Europe?”

Patrick Mata:  U.S. companies are paying the wine tariff – how does that punish the European Union for airplane subsidies?

Want to make sense of the European wine tariffs, which seem to make no sense at all? Then listen to Patrick Mata, whose Ole & Obrigado is one of the leading Spanish wine importers to the U.S.

“I thought we might go out of business,” says Mata, whose company specializes in importing quality, $15 or less wine from Spain and Portugal. “Our margin is 30 percent on a bottle of wine, and the tariff is 25 percent. How were we going to stay in business?”

The good news is that Ole & Obrigado did, despite the tariff and the pandemic (which clobbered its restaurant business). Sales fell only 20 percent in 2020, which Mata considered a victory of immense proportions.

Mata, a long-time friend of the blog, was open and honest about how the tariff and the pandemic have hurt the wine business. Among the topics we talked about:

• Why raising prices to cover the tariff doesn’t work, and why it especially doesn’t work for the $15 wines that Ole specializes in.

• How to give back during a crisis, and why there should be more to the wine business than just making money.

• What Americans are drinking during the pandemic, and why it’s a victory for Big Wine at the expense of small producers — another unintended consequence of the tariff.

Click here to download or stream the podcast, which is about 15 minutes long and takes up 9 megabytes. Quality is mostly excellent – Zoom didn’t act up this time.

Winebits 680: Drink Local, pandemic wine, wine tariffs

drink localThis week’s wine news: Supermarkets embracing Drink Local during the pandemic, plus one more study about pandemic drinking and wine tariffs

• Drink Local thrives: Supermarket News reports that “Retailers deepened their relationships with local beer brewers and winemakers in 2020 to satisfy customers and support their local economies.” Which, of course, is something those of us who have long believed in local wine are very glad to see. The story looks at one California grocer, where virtual tastings with local wineries have far exceeded expectations.

• One more study: The Wine Curmudgeon has been keeping close track of the various pandemic drinking studies, if only because the results show hat we’re drinking less, drinking more, and passing out in front of the TV set – or all three.. The latest study comes from a browser app that offers retail discounts; its findings seem just as reliable as any of the others, which is to say not necessarily reliable at all. There’s no methodology in the release, for one thing, and it claims rice wine sales have increased 37 percent – more than any other kind of wine, more than most spirits, and more than something called “imported craft beer.”

• Whoops: About 10 days ago, U.S. trade officials said they would extend and increase tariffs on a variety of French products, including much wine that had not been taxed in October 2019. Then, at the end of last week, they said they wouldn’t up the tariff, after all. And then maybe they did, depending on news reports this week. Don’t worry if you’re confused. So am I, and even the normally reliable BBC seems confused in the story in the link. Just know that the situation remains the seem as it was before the end of the year, awaiting the new administration.

Sort of good news: Trump Administration doesn’t raise 25 percent wine tariffs

wine tariff Is it possible a wine tariff trade settlement is finally possible?

The Trump Administration won’t raise the 25 percent on selected European wines, which is about as much good news as we can hope for these days.

The U.S. Trade Representative’s statement yesterday said it wouldn’t increase the tariffs on French, Spanish, German, and British wine that have less than 14 percent alcohol. The agency had been re-examining the tariffs, as required by law, and had intimated a couple of weeks ago that it would consider upping the 25 percent rate. Instead, it left the tariff unchanged, as it did on some whiskeys, other spirits,  and some food like Italian cheese.

European Union officials welcomed the news, saying the decision to refrain from an increase would help prevent a further escalation in the trade war. Both sides said they would try harder to reach a settlement.

The tariffs were enacted last October as part of a decades-old dispute about airplane parts, which keeps getting sillier and sillier as the world battles both a recession and the pandemic. Those of you who aren’t worn out by all of this can check out the tariff’s history here.

Winebits 636: Wine tariff updates, icewine

wine tariffThis week’s wine news: U.S. wine tariff update, which may include some good news. Plus, is this the beginning of the end of icewine?

• Big tariff losses…: The Robb Report, addressing last fall’s 25 percent wine tariff, says “The resulting price hike has made many bottles simply too expensive for U.S. sellers to import. Now, with an abundance of wine bottles in reserve, French vintners are reportedly slashing prices to stay afloat.” The story doesn’t get much more specific than that, though it does cite the French wine industry’s continuing woes. Still, one of the smartest people in the wine business told me, after the tariffs went into effect, that this was possible. Wine can’t be stored like steel, to be sold when demand picks up. It needs to be sold every vintage, and if vintages start backing up, the only way to sell them is to cut prices. We shall see.

• …but hope on the horizon? The Financial Times, the authoritative British business newspaper, says one possible Trump Administration response to the coronavirus might be slashing tariffs. The paper’s reasoning? That if the disease slows the world economy, it makes sense to remove the tariffs to cut prices to increase demand. The article speaks specifically about Chinese tariffs, but if it’s good enough for pork and soybeans, why not wine?

• Too warm for icewine: Icewine is one of the wine world’s great treats – rare, expensive, and incredible to drink. Now, thanks to warmer winters in Germany, it may be going away. That’s because icewine is made by harvest frozen grapes on the coldest of winter mornings, and there haven’t been enough of those mornings this winter. The German wine trade group says there will be icewine vintage for 2019, and only one producer will make a tiny amount.

Trump Administration backs off 100 percent European wine tariff

But we’re still stuck with the 25 percent wine tariff, and perhaps for at least another six months

wine tariff
Higher prices: This 1-liter bottle of French rose, about $12 before the tariff, now costs $2 more on sale at one national retailer.

The Trump Administration said Friday it would not raise its European wine tariffs to 100 percent, which would have included most of the region’s wine. That’s the good news.

The bad news? We’re stuck with the 25 percent tariff imposed last fall until the next review, set for August.

Still, this is much more than a half empty glass. The decision seemed to reflect the wine industry’s tremendous and almost unprecedented lobbying effort against the 100 percent tariff, in which representatives from each of the three tiers testified at U.S. Trade Representative Office hearings, blitzed the old and new media, and organized public anti-tariff campaigns. In this, groups that typically disagree as often as they agree worked together for the greater good.

For example, the Wine Institute, the trade group for California producers, has been working for years to change state laws to make it easier for consumers to buy directly from wineries. This has been opposed by most of the second tier, since wholesalers have a monopoly on selling to retail and restaurants under the three-tier system and don’t want to allow any exceptions. But the two groups were side by side in opposing the tariff.

“It was one of the rare cases in the industry when everyone’s interests aligned,” says Cindy Frank, a long-time wine industry executive who has worked as an importer, wholesaler, producer, and retailer and who testified at last month hearings before the U.S. Trade Representative in opposition to the tariffs. “It’s the one issue that has worked itself all the way through the three-tier system.”

So where does this leave us?

• The tariff decision was announced on Friday afternoon. This timing, after everyone leaves for the weekend, almost always means the people announcing the news didn’t want to talk about it. Which often means they did something they didn’t want to do, and so didn’t want to have to explain their decision. Still, that aircraft tariffs were increased, when the initial dispute was about aircraft, speaks volumes. The World Trade Organization ruled in October that EU subsidies to Airbus were illegal, and that the U.S could impose tariffs in retaliation.

• Credit some of the decision to our friend, the three-tier system. Apparently, Trump Administration officials didn’t understand what three-tier was or how it worked. Their questions, said several people who testified, assumed retailers, importers, and wholesalers could easily replace European wine with imports from other parts of the world, just as they would steel or soybeans. The officials didn’t know how severely three-tier restricts how wine can be sold in the U.S.

• Economic turmoil. The wine industry lobbyists, as part of their effort, did an excellent job in showing that higher prices for imported wine would lead to job losses, bankruptcies, and lost sales up and down the U.S. supply chain, whether big or small retailers, producers, importers or distributors, says Southern Glazer’s Barkley Stuart, the chairman of the Wine & Spirits Wholesaler Association’s board of directors.

• The tariff was re-examined four months after it was applied as required by U.S. law. This was a point of confusion after the October ruling, and I reported the process incorrectly in the “Does anyone have any idea what’s going on?” post (and since updated). The next tariff review, as required by law, must come by August. In addition, the WTO is expected to announce later this year that the U.S. gave Boeing illegal subsidies in retaliation for the EU subsidies to Airbus. If that happens, then there’s political cover for both sides to negotiate away the tariffs, but no one knows if or when that will happen.

• Retailers, pricing, and rose season. As reported here and elsewhere, retailers, distributors, and importers have worked together since October to minimize the 25 percent tariff’s effect on prices. But, as one Dallas retailer told me, all bets are off on holding the line on prices when rose season arrives in the next month or so.

Winebits 632: Sommelier cheating scandal, wine tariff, wine lists

sommelier cheating scandalThis week’s wine news: A comprehensive look at the sommelier cheating scandal, plus the wine tariff sinks French wine imports and wine list foolishness

• Sommelier cheating scandal: The trade website SevcenFiftyDaily takes a long, thorough, and comprehensive look at the 2018 sommelier cheating scandal – some 4,000 words. It’s mostly well done, fair, and reaffirms the suspicions that those of us had about the lack of transparency surrounding what happened: The “events of the past year raise broader questions about an organization—and the title it confers—that’s one of the wine world’s most powerful. And not just for the trade: With the 2012 release of the film Somm, which details the efforts of four Master Sommelier candidates to pass the exam, and its subsequent appearance on streaming services like Netflix, many consumers have come to view the MS title as the standard of wine culture.”

• Plummeting exports: The 25 percent U.S. tariff on some European wine has pounded French wine exports to this country, says a French government official. They dropped 44 percent by value in November 2019 from the previous month, after the import penalty went into effect on October 2019. The story also says that the “tariffs have been especially painful to producers at the lower ends of the market, where a 25 percent price hike can turn an affordable bottle into a once-in-a-while luxury.” We should know something this week or next about the next stage in the trade war after the World Trade Organization rules on a complaint by the European Union about illegal U.S. subsidies to Boeing. It was illegal EU subsidies to Boeing competitor Airbus that started this mess.

• Incomprehensible wine lists: A recent Vinepair podcast takes on a subject guaranteed to make the Wine Curmudgeon crazy: The “many wine lists floating around out there that seem to revel in being inscrutable to all but the most sophisticated and educated wine drinkers.” The podcast talks about the problem, explains why it doesn’t have to be one, and offers more pointers on buying wine in a restaurant.