It's the Greatest Short Term Threat to the American Wine Industry

The high likelihood that a Trump administration will re-impose wine tariffs

The single greatest threat to the long-term health of the wine industry is the potential for new Federal Dietary Guidelines to recommend to Americans that they only drink one or two drinks per week. I’ve been saying this now for a long time. However, if you are interested in the greatest threat to the American wine industry in the short term there is no question: Tariffs on imported wines.

How big a threat to the American wine industry are tariffs? The last time they were laid on European wines it caused the creation of the United States Wine Trade Alliance (USWTA)—a national trade association consisting of importers, wholesalers, retailers, restaurants, and producers. It is the only time I’m aware that all of these elements of the American wine industry agreed to come together and work together. That’s how big a threat tariffs are to the American wine industry.

So here’s what you need to know: That threat of tariffs is with us again.

In the fall of 2019, the Trump administration laid a variety of tariffs on European wines. At the time the American wine industry was not prepared to fight this threat. It was essentially left flat-footed. It led to the creation of the USWTA. After President Joe Biden took office in 2021, those tariffs were suspended or put on hold. However, they were not eliminated and the difference is important.

So here’s the current threat: Donald Trump has said that one of his economic priorities if he wins the 2024 Presidential election will be to lay a 10% tariff on all goods imported to the United States. However, new tariffs require congressional approval. Whether he can obtain such approval is unknown and depends upon the partisan composition of the House and Senate after 2024.

It is also notable that Robert Lighthizer, the U.S. Trade Representative in the Trump administration, has only seen his stock rise since President Trump left office. Lighthizer is an economic nationalist who is not enamored with free trade. He was the architect of the Trump tariffs on wine. Now, several sources are suggesting that in a second Trump administration, Lighthizer could become Treasury Secretary, a much more influential post than U.S. Trade Representative.

Now, recall that the wine tariffs were not ended, but rather “suspended”. As a result, reinstituting these tariffs do not require congressional approval. The fear among some very smart people who have been instrumental in fighting wine tariffs is that as a new Trump administration battles with Congress to pass new tariffs, they will simultaneously reinstitute those tariffs that do not require congressional approval: those include tariffs on wine.

Last time tariffs were imposed by the previous Trump administration they amounted to 25% on a variety of European wines. In the year and a half that those tariffs were in place, American importers cut checks amounting to $240 million to the federal government to pay them. That $240 million was then passed on down to wholesalers, then to retailers, and to consumers.

And here’s a little kicker for you: nothing is stopping a new Trump administration from not just reinstituting 25% tariffs on European wines, but also increasing tariffs on imported wines up to 100%. On nothing more than a presidential executive order.

The idea behind laying tariffs on foreign goods is to promote domestic products by making foreign products more expensive. However, this doesn’t work with wine. In fact, American companies make more by selling foreign wines than foreign producers make by selling their wines in the American marketplace. More important, both American wholesalers and American wine retailers see their revenue decline when tariffs are imposed given the higher margins that come with selling imported wines. This harm to American retailers and wholesalers trickles down to American producers. When tariffs were imposed on imported wines beginning in 2019, wholesalers and retailers immediately pulled back on signing on new suppliers and stocking their shelves with additional domestic wines knowing that their revenues would decline. This in turn harmed American producers seeking distribution and those seeking additional purchases from their wholesalers.

It’s also important to note that many wines—particularly Old World wines—are not fungible. That is to say, those folks who buy Burgundy, Bordeaux, and other European wines will not necessarily switch over to purchasing American wines when those imported wines become significantly more expensive due to tariffs. American producers who think tariffs will be a boon for their sales will be disappointed.

The USWTA that formed in the wake of the 2019 tariffs will undoubtedly regroup and again work to fight the restitution of tariffs. Money will be raised. Alarms will be sounded and if you are reading this, you are likely the kind of person who will hear about the coming threat of tariffs from other quarters in addition to this.

Listen when you are urged to help fight these tariffs. Listen to the folks beside me telling you that tariffs are a real threat. If you are in the wine industry, it’s in your interest to take this seriously.

I’m not endorsing anyone for president. I’m not urging a vote for Joe Biden or against Donald Trump. I’m merely suggesting that there is trouble brewing for the American wine industry that, in the short term, is unrivaled by anything else. And it’s time to pay attention.