The wine industry faced significant challenges due to tariffs imposed by President Trump’s first administration. During the presidential campaign, and since his election on November 5, 2024, President Trump has made it clear that he will enact higher tariffs as a key part of the political agenda of his second administration. A few days ago, he nominated Jamieson Greer as his pick for U.S. Trade Representative as the nation’s top trade official, who served as chief of staff to Robert Lighthizer, then U.S. Trade Representative during Trump’s first term; if confirmed by the U.S. Senate, Mr. Greer is expected “to pursue an ambitious trade agenda.” This post highlights the history of Trump’s tariffs on wine, their effects, and what might be expected in his new term.

Trump’s First Term: A Retrospective

In October 2019, the Trump administration imposed a 25% tariff on still wines under 14% alcohol by volume from France, Germany, Spain, and the United Kingdom. These tariffs were part of a broader trade dispute with the European Union over subsidies to aerospace companies. The tariffs led to increased costs for importers, distributors, and ultimately consumers, causing significant disruption in the wine market.

Notable Effects of the 2019 Tariffs:

1. Increased Prices: The cost of European wines in the U.S. rose, leading to higher prices for consumers. The tariffs specifically targeted alcoholic beverages. However, supplies such as barrels and other equipment were not subject to them.
2. Market Shifts: Some European producers adjusted their products to avoid tariffs, such as by increasing the alcohol content of their wines.
3. Economic Impact: The tariffs strained relationships with European trade partners and led to retaliatory tariffs on American products. For instance, the European Union imposed a 25% tariff on American whiskey and Harley-Davidson motorcycles.

Potential Tariffs in Trump’s New Term

As Trump begins his new term, there is speculation about the potential for new tariffs and their impact on the wine industry. Trump has indicated a willingness to impose even higher tariffs on a broader range of products. Here are some possibilities:

1. Broader Tariffs: Trump has suggested tariffs as high as 100% on goods from China and 25% on goods from Mexico and Canada. When Trump imposed tariffs on China in his first administration, in April 2018, China retaliated by imposing a 15% tariff on U.S. wine. Thus, broader tariffs in Trump’s second administration could impact (directly or indirectly) the wine industry.
2. Economic Consequences: Higher tariffs could lead to a “long-term war” in trade, affecting thousands of jobs and causing economic instability.
3. Industry Response: The wine industry is already preparing for potential disruptions. Importers and retailers are considering stockpiling European wines to hedge against future price increases.

The Broader Economic Context

The potential for new tariffs comes at a time when the global economy is already facing significant challenges. The COVID-19 pandemic had already disrupted supply chains and led to economic slowdowns worldwide. In this context, additional tariffs could exacerbate existing problems and create new ones.

1. Supply Chain Disruptions: The wine industry relies on a complex global supply chain. Tariffs can disrupt this chain by increasing costs and creating uncertainty.
2. Consumer Behavior: Higher prices for imported wines may lead consumers to switch to domestic alternatives or reduce their overall wine consumption.
3. Global Trade Relations: Tariffs can strain relationships between countries and lead to retaliatory measures, further complicating international trade.

Industry Strategies and Adaptations

The wine industry has shown resilience in the face of past challenges and is likely to adapt to new tariffs as well. Some strategies that industry stakeholders might employ include:

1. Diversifying Supply Chains: Importers may seek to diversify their sources of wine to reduce reliance on countries subject to tariffs.
2. Product Adjustments: Producers might adjust their products to avoid tariffs, such as by changing the alcohol content or packaging size.
3. Advocacy and Negotiation: Industry groups may engage in advocacy efforts to influence trade policy and negotiate for more favorable terms.

Conclusion

The wine industry faces significant uncertainty as President Trump begins his new term. The tariffs imposed during his first term had far-reaching effects, and new tariffs could exacerbate these challenges. Industry stakeholders are bracing for potential economic fallout and preparing strategies to mitigate the impact. As the situation evolves, the wine industry will need to navigate these complexities to maintain stability and growth.

The future of the wine industry under Trump’s new term remains uncertain, but one thing is clear: the industry will need to remain adaptable and resilient in the face of ongoing challenges. By understanding the potential impacts of new tariffs and preparing accordingly, the wine industry can continue to thrive despite the obstacles it may encounter.