What do wine, cheese and Airbus have in common?

They’re in the cross-hairs of President Trump’s tariff war!

iStock image

For years European Union countries have subsidized Airbus, the only competitor to Boeing for the world’s aircraft market. In October World Trade Organization (WTO) ruled these subsidies illegal and President Trump promptly imposed 25% tariff on some goods from France, Germany, Spain and Great Britain. Products affected included wines (below 14% ALC) from France and Spain, Scotch and Irish whiskey from Northern Ireland and some cheese from France and Italy. To make matters worse, the tariffs became effective with short notice and many goods were in-transit. Some importers and their distributors temporarily absorbed the additional costs but many are now passing additional cost to their customers.

Furthermore, US Trade Representative (USTR) is now considering 100% tariff covering more products such as

    • ALL wines (no exemption for alcohol content or sparkling wines)
    • non-alcoholic beer, brandies and whiskies
    • dairy products (i.e. cheese) 
    • marble counter-tops.

100-percent tariff would apply to all (28) EU countries. This month USTR will review comments from affected US companies and consumers, but there appears no resolution in sight.

I have enclosed today’s letter from Antonio Galloni (Vinous Media CEO, wine industry’s leading publication) to President Trump that describes the implications of this tariff.

January 2, 2020

The President
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500

Dear Mr. President:

I am writing to express my strong opposition to the second round of tariffs on French and EU goods that the Office of the United States Trade Representative (USTR) is considering in connection with France’s Digital Services Tax and the WTO’s recent ruling on the Airbus/Boeing dispute.

As the Founder, CEO and Lead Critic at Vinous, one of the world’s most highly respected wine publications, I engage every day with hardworking Americans whose livelihoods are now seriously at risk by potential USTR actions. If enacted, these tariffs will result in catastrophic and permanent financial harm to the thousands of working-class families in our country that depend on the economic viability of EU goods.

The US wine industry employs 1.74 million people and generates $68.1B in sales through both retail and hospitality channels. Approximately a third of these sales are from imports, 75% for wines produced in EU countries. Those wines are sold by every mom-and-pop corner liquor store struggling to pay the rent, every salesperson trying to meet her sales target, every young person waiting tables to put themselves through school, every truck driver working around the clock to deliver packages to consumers and businesses, and many thousands of other middle-class Americans around the country who work in the wine industry. The proposed tariffs, which range from 25-100%, will have a devastating effect on these people and their families.

Wines are not easily interchangeable products. Consumption of EU wines will not shift to US wines in a trade war. Moreover, the highest value EU wines are not like smartphones or widgets, where manufacturing can easily be increased or decreased according to demand, but are instead inherently limited in production. The companies that make those wines will simply find other markets for their products. Once those wines are sucked out of the US economic sphere, they will never come back.

In addition, these tariffs pose a significant and very real threat to the long-term viability of wineries in the United States. In 2018, the EU was the largest export market for California wines. The EU could very well choose to retaliate by levying tariffs on US wines, which would be devastating to American wineries precisely at a time they need growth from those markets to survive and are broadly beginning to establish themselves as qualitative peers to the very best European wines. Moreover, lower-priced wines from EU countries are often the first wines American consumers try before moving into higher-end segments of the market where the US has traditionally been so strong. If those affordable wines are no longer available, younger consumers will shift to other beverages such as beer and spirits, dealing another crushing blow to our US wine industry.

A new round of tariffs will ultimately create a domino effect where the entirety of the US wine industry shrinks (both distribution and production), leading to a decrease of sales tax revenues, lower corporate tax revenues, layoffs and loss of personal tax revenue.

As a citizen, I am deeply appreciative for everything you do to protect our country’s economic interests. I respectfully believe there are more direct and targeted measures that can efficiently address our current trade disputes. I urge you not to put the livelihood of so many American families at risk with these proposed tariffs.

Sincerely yours,

Antonio M. Galloni CEO & Founder

Cheers, Bob the WineGuy
Bob the WineGuy on FaceBook and Instagram.
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