Wine sellers are bracing for another round of tariffs that could see the price of imported European wines and products raised in price by up to 100%. Western Massachusetts wine sellers are worried this could end long-lasting relationships with European wine sellers and importers and devastate the industry in the U.S.
“Can you imagine saying, ‘Oh, yeah, I used to buy this one for $15 and now it’s $30’ and it’s not $30 because of import, greed or the winery raising their prices, it’s the tariff’,” said Michael Quinlan, manager of fine wines for Table and Vine.
The Office of the U.S. Trade Representative made its latest move to impose tariffs in 2019 and propose future tariffs for Aug. 12, in what has been a 15-year dispute between the United States and the European Union. Each claim that the other’s airplane manufacturer, Airbus and Boeing, is being unfairly subsidized.
In 2006, the U.S. first filed a case with the World Trade Organization claiming that Airbus, which is jointly owned by Germany, France, Spain and the United Kingdom’s BAE Systems, had received $22 billion in illegal subsidies.
“The first one that did go through, the 25%, definitely affected a lot of our cheese and wine pricing,” said Benson Hyde, co-owner of Provisions in Northampton where at least 50% of the wines on sale are imported from the EU. “Because we work with a lot of smaller importers, they would go belly up immediately because they couldn’t afford to order anyone because they have to pay that tariff on entry [to the U.S.]”
Provisions have been in Northampton for 10 years supplying customers with a wide variety of wine and cheese from across the globe for reasonable prices. If the cost of European wines goes up, it would be devastating for its supply and would have to rely on new world wines.
‘Old world wine’ refers to the traditional winegrowing regions of Europe, while ‘new world wine’ refers to everything else.
In June 2010, the WTO ruled in favor of the U.S. and in September 2016, the WTO confirmed that the European governments not only failed to meet the compliance deadline to remedy $17 billion worth of past subsidies provided to Airbus but had since provided an additional $5 billion in illegal aid.
In October 2019, the U.S. was awarded the right to impose tariffs on $7.5 billion of annual EU imports in the case against Airbus. The U.S. imposed partial tariffs on most Airbus jets, as well as additional products such as cheese, olives, single-malt whiskey and wines. The EU Trade Commission said it would consider its next steps, including a possible appeal, while seeking an overall agreement.
However, the appeal process is unlikely. As of Dec. 10, 2019, the WTO Appellate Body ceased to function due to the U.S. blocking new appointments. Any appeals that were launched would have fallen into a legal black hole. Without recourse to the highest court of international trade law, the rules-based trading system may weaken, with fewer protections for smaller economies.
The USTR published a list of all the products that will be subject to the proposed tariffs. The notification includes two annexes: Annex I lists the specific products that are currently subject to additional duties of 10% to 25%, while Annex II lists products for which additional duties of up to 100% are proposed.
Annex II implements tariffs on not only Germany, France, Spain and the UK that were solely affected in the first round, but the entire EU. Italian wine, for example, which had avoided additional tariffs in the first round because it wasn’t directly connected with the airbus, will now be included.
However, wines more than 14% alcohol by volume or stored in containers larger than two liters are exempt from the tariffs.
Hyde told MassLive that importers had been raising the price on all their products to absorb the increase in price in the U.S. or soaking up the cost themselves on wines from France and Spain in the first round. Now the entire continent could face an increase, this will be much harder and, according to Hyde, not manageable in the long term.
“I have made clear to the U.S. Trade Representative that he must use these tariffs effectively to maintain pressure on Europe and that the tariffs must be strategically deployed and balanced against collateral damage to our businesses and employees at home,” said U.S. Rep. Richard E. Neal, chairman of the House Committee on Ways and Means in a statement to MassLive. “Many of the food and drink products on the list of proposed tariffs will impact our pillars of main street who are making sure our communities are fed and taken care of right now.”
The proposed tariffs couldn’t have come at a worse time for many businesses with the shutdown of the state amid the coronavirus pandemic. Hyde, who has been running a successful business for a decade, told MassLive that it has been like opening a new business multiple times over in terms of anxiety and stress.
“It turned everything on its head,” said Hyde. “We had to come up with brand new systems and new ways of doing basically everything. It’s complicated.”
Table and Vine in West Springfield have over 4,000 varieties of wine and boasts on its website that it has the largest selection on the East Coast. Of the 4,000 varieties of wine. Roughly 1,600 or 40% of those are from European countries. Of that 40%, roughly 20% of that is imported directly by Table and Vine themselves.
“As a retail store that offers secure online ordering as well as curbside pickup, we’ve been able to really satisfy our customers’ demands,” said Quinlan. “The issue for us has been, from a wine standpoint specifically, we’ve seen people buying maybe more bottles when they normally buy but buying in the less expensive wines than normal.”
Quinlan said there’s a cautiousness about spending more on wine due to the pandemic and the uncertainty around employment with so many people being laid off. He worries if the price goes up on the European wines it wouldn’t be feasible to stock them.
“To talk about the tariffs that are currently in place, the 25% has led us into this unprecedented place,” said Quinlan. “I always think about wines like Sancerre, which is such a famous place and such a famous type of wine. In Sancerre’s case where sometimes you would find something between the $20 and $25 range, now suddenly you’re having trouble finding them under $30 with the 25% tariff. That doesn’t mean that the customer is ready to automatically go ahead and say, ‘well I used to buy this wine for $23 and now I’m going to buy it for $29.’ So that is a concern. It hurts the store and it hurts restaurants because again, it’s a wine that people buy with confidence, but suddenly there’s an uncertainty there.”
Sancerre is an appellation in the Upper Loire Valley, France which produces mostly white wines, made from Sauvignon Blanc and also some reds from Pinot Noir.
The issue for wine sellers is the uncertainties of the amount the tariffs could be when the USTR announces their decision regarding any potential changes around Aug. 12.
If the tariffs are closer to the higher end of the percentage, Quinlan and Hyde both said it would be devastating for the industry in, not only Massachusetts but also the U.S. as a whole.
“It would be devastating,” said Quinlan. “Sometimes [I] will haggle or even argue with our vendors over pricing because we will say to ourselves, ‘well, you know, I’m not sure that this wine is worth $2 more’ but we’re not talking about $2, now we’re talking about doubling the price.”