Food+Drink » Features

The Trump administration pushes pause on wine tariff escalation – for now

The Day After Tomorrow

by

comment

The U.S. wine community breathed a collective sigh of relief on Valentine's Day when United States Trade Representative Robert Lighthizer announced that tariffs would remain at 25 percent instead of increasing to 100 percent as was initially proposed by the Trump administration. But to say we're safe might be too ambitious. The status quo isn't necessarily a win when any tariff on wine is fundamentally ineffective, even harmful, to those in the industry. There's also the very real possibility that we could be facing the same threat again later this year.

To recap the tariff turmoil: In October 2019, the Trump administration placed a 25 percent tariff on a number of European products like cheese, olives, whiskey, and wine. By December, the administration threatened to ramp up the tariffs to 100 percent, sending a ripple of panic through all levels of the wine and spirits supply chain.

Remember, this debacle is a result of the 15-year dispute between the European Union and the U.S. over their respective airplane manufacturers receiving unfair subsidies. European wines, and consequently those whose livelihood relies on them, are caught in the crossfire.

The effects of a 25 percent tariff were enough to sound alarms for the U.S. wine community, but the potential for a 100 percent spike led to outcry across the country. This January, Charleston food and beverage professionals joined together to host "Wine Tariff Reckoning" specials to educate the community on how much their favorite pour could cost if the tariffs became a reality. They also gave discounts to those who commented in protest to the tariffs at regulations.gov.

Meanwhile, Harry Root, founder of the aptly named Grassroots Wine, took what was essentially a leave of absence from his business for two months to fight in D.C. In the process, he (somewhat accidentally) founded a full-fledged organization by virtue of a Facebook group called the U.S. Wine Trade Alliance.

The group, which now has nearly 6,000 members, helped rally others to take action. "We had a good group of people that live in D.C. that were working the Hill on a regular basis," says Root. "We certainly had support from all over the country with people helping set up meetings with congressmen, helping to write letters to the USTR, and it really became a pretty efficient and effective organization."

Root personally met with dozens of lawmakers, lobbyists, political influencers, and decision makers to advocate for wine jobs. His bottom line is simple — these tariffs hurt American businesses worse than they hurt Europeans.

"One thing that I think is certainly not unique to South Carolina is that we looked at this as a restaurant tax in a lot of ways, and that was a really effective argument that we made with all the congressional delegations and with the USTR," says Root.

Though the tariffs could have applied to the entire EU, they now remain in place at 25 percent for only the four countries directly accused of providing questionable subsidies to Airbus: France, Germany, Spain, and the U.K. Yes, vino Italiano and other Old World offerings are in the clear.

"Good enough" may not be good enough, however, when we could be facing the same tariff battle in 180 days ... or as soon as tomorrow.

It's called "carousel" retaliation meaning that the administration can regularly revisit the list of tariffed goods and make revisions in order to cause the greatest impact and uncertainty for the targeted group. "They absolutely will revisit this in 180 days. That's part of the mechanisms of this kind of trade dispute, so they have to," says Root. "But they also reworded this decision so that they could change this at any time if the EU imposes any retaliatory tariffs on the United States."

Taking a hard look at the practicality of the plan, it's easy to discern that slapping tariffs on wine and similarly distributed products isn't effective. "It goes against the tenants of the USTR. We know that wine is a relatively ineffective product as a tariff because we're replaceable as a trade partner," says Root. "Even now with 25 percent tariffs, China's purchase of French wines is going up almost exactly proportionately as our purchases go down."

Not only can European producers shift focus elsewhere, but the tariffs also disproportionately hurt more U.S. businesses than European. All alcohol is, by law, distributed via a three-tier system in the U.S. consisting of importers, distributors, and retailers. By this very definition, the tariffs hurt three American businesses for every one European business that feels the impact.

On a positive note, it's worth noting that during such a politically divided time, representatives from both sides of the aisle have shown up to voice support for this grassroots cause. Root says the united front they were able to present was "really impactful and something that I didn't quite expect. We got help from Joe Cunningham and William Timmons, but also Tim Scott's and Lindsey Graham's office were both vital to getting our message to the USTR and the administration that these tariffs hurt American business worse than they hurt Europeans."

"Tourism and the hospitality industry are vital economic drivers in the Lowcountry and throughout our state," said Cunningham in a statement to the City Paper. "I am incredibly relieved that Lowcountry restaurants, importers, and other small business owners have been spared the 100-percent tariff on EU wines and spirits. While tariffs can sometimes be useful towards leveling the playing field for American businesses competing abroad, we must ensure they do not come at the cost of American jobs here at home."

Next steps for Root and his fellow advocates? Keep growing their foundation, to start. Root says they'll be working on formalizing the U.S. Wine Trade Alliance and getting ready for the next 180 days. Through increased awareness of the ineffective and harmful impact of the tariffs, Root hopes wine can be removed from the tariff package altogether.

Add a comment