Update: While no formal resolution has been announced, on Monday, January 20, the U.S. and French presidents agreed to reach a compromise on tariffs related to the digital tax dispute—for now. On February 14, the USTR officially announced there would be no tariff increases on the EU wines and spirits currently subject to a 25 percent tariff related to the Airbus dispute, and that these tariffs would be revisited in 180 days.
As importers, wholesalers, and retailers are learning to cope with the 25 percent tariff imposed in October on many wines and spirits from Europe, the trade now faces the threat of even more drastic sanctions: A proposed 100 percent tariff on an expanded list of wines and spirits imported from the EU.
The U.S. Trade Representative (USTR), a government agency responsible for developing and coordinating U.S. international trade, published the expanded list of products under consideration for tariff increases on December 12, which includes a wide range of foods, beverages, and other products. The list includes alcohol products from across the EU including wine of all alcohol levels, dessert wine, sparkling wine, and Irish and Scotch whiskies. It represents a significantly broadened list of products than was sanctioned in October, which was limited to nonsparkling wines under 14 percent alcohol by volume from four countries (France, Germany, Spain, and Great Britain.)
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The tariffs are a penalty for a non-industry-related dispute: The first round—and the expanded proposals—are in reaction to EU subsidies for Airbus. Separate, newly proposed tariffs that will also impact the alcohol industry are tied to a French revenue tax on companies that provide digital services in the country, which hits Google and Facebook, among other American tech firms.
The looming threat of 100 percent tariffs is already costing jobs, hurting businesses, and causing instability as the wine industry braces for a decision from D.C.
Across Tiers, Industry on Edge with Expanded Threats
In early December, the USTR initially proposed tariffs of “up to 100 percent” on $2.4 billion worth of French products, most notably Champagne and cheeses. Just days later, that threat was broadened to include nearly all wines and spirits produced in the 28-member European Union.
The industry reaction was one of near-disbelief and outrage. “Food and wine are agricultural products that shouldn’t be used as bargaining chips in aerospace or technology industry disputes,” says Gino Colangelo, whose communications agency represents many European food and wine suppliers. “My clients are managing to spread the burden of the 25% tariffs imposed this past October… taking whatever steps they can in the short term to blunt the impact. But 100% tariffs are totally different; the long-term damage from this could be irrevocable.”
The beverage alcohol trade did not pick this fight. Unfortunately, the industry may be forced to adapt to a new center stage role in the political arena. Importers and distributors are frantically contacting senators and congressmen to protest any new tariffs, but the general industry mood is far from optimistic.
“If enacted, these tariffs could have the effect of essentially crippling the importation and sale of European wine in the U.S.,” says Michael Skurnik of the NY-based import and distribution company, Skurnik Wines. “This would mean a devastating loss of revenues, jobs, and taxes to many sectors of the US economy.” Skurnik has launched an industry-wide campaign to gather specific data on the exact financial losses to various businesses and families in order to illustrate the tariffs’ full impact more completely.
Retailers will suffer alongside suppliers and distributors, says Lance Cerutti, owner of Suburban Wine & Spirits in Yorktown Heights, NY. “What am I supposed to do: Replace France with California? The prospect of 100% tariffs is terrifying; it will put many people out of business.”
Calls for Comments Through January 6 and 13
What happens next in Washington, D.C., is certain to be a combination of bureaucratic process and political maneuvering. The USTR invites written comments from the public for each of the proposals, due by January 6 concerning tariffs in response to France’s digital service tax, and due by January 13 concerning tariffs related to the aircraft dispute.