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Hawley Smoot! It's Terrible Tariffs Time Again.

US Wineries should hope for the best, prepare for the worst
by Curtis Phillips
January 10, 2020

I've been seeing a fair number of articles commenting about the 100 percent tariffs proposed by the current administration. As one would suspect the consumer wine press is universally against any increase in tariffs with the Wine Spectator providing good coverage of the issue as well as a firm call to action by Wine Spectator publisher, Marvin R. Shanken. The period for public comments closes in just a few days, on January 13, 2020. If you haven't commented against the proposed tariffs already, please do so here. That's my public service announcement. Do your part. Stand up, speak out and be counted.

Now, I'd like to address what I perceive to be a fog of denial regarding these tariff increases. I am pessimistic. These tariffs will go through unless France and the rest of the EU caves in. I don't see that happening. I fear that the United States Trade Representative (USTR) will pay the least attention to any public comments. This has little or nothing to do with the current administration. It doesn't matter which party controls the Executive Branch of the Federal Government. Be it Republican or Democrat, the USTR has never missed an opportunity to throw the wine industry under the bus for as long as I can remember. I suspect that this was or would have been true of the Whigs, Federalists, or the Bull Moose Party, and would be true of the Greens if they ever won the Presidency.

Even ignoring the impact that the tariffs would have on French wineries, the proposed tariff increases would be horrible, devastating even, to wine importers. What isn't so obvious is that even without any retaliatory tariffs on the part of the EU, the proposed tariffs could have a severe impact on US wineries. Europe is the US wine industry's largest export market. Even without further EU tariffs on US wine, the USTR has just made it the patriotic duty of every European to *not* buy our wine. If the EU retaliates, and I'm pretty confident that they will, we'll just be going from terrible to devastating. We're already having a trade spat with China, the UK is in the midst of their own self-inflicted crisis, where then should we be selling wine after the USTR decides airplanes are more "American" than wine once again?  

That right there is probably the crux of the matter. Despite being as American as Thomas Jefferson, wine is perceived as being something only those naughty, elite, cheese-eating, foreigners make and consume. It's bad enough that something like 30 percent of the adult population of the US won't touch our product.

I think another reason is that, even though there are wineries in every state, the US wine industry is a small industry that has minimal influence in Washington DC. E&J Gallo may be the 800 pound gorilla that we all have avoid in order to keep from gettting stepped on, but compared to a multinational defense contractor like Boeing, Gallo is a quaint little mom and pop family business of little or no importance. If Gallo is too small to register in the dim bulbs of the USTR, what chance do the the rest of us have? Even collectively, the bureaucrats of the USTR have historically considered the US wine industry as something like emu ranchers. At best to them, we are an amusing statistic and a barganing chip that is easily bartered away.

Turning a challenge into an oportunity
I think that a silver lining to all this silliness is that the imminent doubling of tariffs should make US winemakers re-evaluate the the wine market as a whole. To which soft spots in the US market have European wines been marketed and which of those are most vulnerable to an increase in tariffs? My thinking is that consumers of First Growth Bordeaux and Burgundy wines won't really notice. Anyone that can afford their already nose-bleed-inducing prices can afford to double down and pay twice as much. No, it is the food friendly bargain wines from France, Italy, and Spain that will be priced out of existence in the US.

Winemakers should be honest with themselves. We certainly make inexpensive wines, but in the main do we really hit the same market niche, in our own domestic market, as do the largest European import brands? I would argue that not only do we not do so, we fail so miserably at the challenge that we've been leaving a pile of money on the table for the Europeans to sweep up.

What I think US winemakers should do, right after they register their protest to these tariff with the USTR, is start planning to make wines that target the same market segment. It's not rocket science. We all should know what to do. Why then are so few US wineries that target the consumers for these wine effectively and profitably? I would like to see more proprietary blends with more acidity, less oak, or no oak at all, and most of all wines that are unashamed to be paired with food.

 


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