California's winemaking industry faces uncertainty following President Trump's recent threat to impose a 200% tariff on wine, Champagne, and other alcoholic beverages imported from the European Union. Yet the announcement, made through social media channels, has especially rattled smaller, family-owned wineries and farms throughout California. Trump suggested that these tariffs would benefit American wine producers, stating, "This will be great for the Wine and Champagne businesses in the U.S."
A number of California vintners and grape farmers have recently raised concerns over the possible effects of these proposed tariffs. What’s more, the proposal comes as trade tensions between the United States and the EU are rapidly rising. Many European retailers have already started pulling US liquors from their shelves. In retaliation, the EU recently pledged to slap a 50% tariff on American whiskey come April.
Concerns from California's Wine Industry
Former Republican Congressman John Duarte now operates a family farm and grapevine nursery. While he acknowledged that some American and European trade practices were undoubtedly unfair, he emphasized avoiding knee-jerk reactions and focusing on a thoughtful approach to addressing these imbalances.
“At first, you want to be thankful that President Trump is standing up for the domestic wine industry. That should be a good thing,” Duarte remarked.
John Williams, founder of Frog's Leap winery in Napa Valley, highlighted the interconnectedness of global trade for family-run businesses like his own.
“Even though we’re a farming family business, there’s a global link,” Williams stated.
He sounded alarm bells on the second order impact tariffs are having on the industry.
“This is not good for our industry in general.”
Economic Impact of Proposed Tariffs
These imminent tariffs will deal serious blows to U.S. and European markets. In 2023, France exported about 27 million bottles of Champagne to the United States. This created a new market for the U.S. as the number one destination for this bubbly drink! A 200% tariff on Champagne would be devastating for this market niche. Lundquist, speaking on behalf of California’s wine industry, says it can only be expected to deliver a “devastating blow.”
Lundquist elaborated on the challenges faced by small wineries:
“Most of these operations are relatively small, usually family-owned and employ a lot of people in their communities.”
There’s a school of thought that domestic sparkling wines stand to gain from these tariffs and will experience a bump in sales. What is undeniable is that people are nervous about the long-term effect.
“Nobody wants a trade war. I don’t know if that’s in anybody’s best interest,” Lundquist commented.
Navigating Global Trade Dynamics
The proposed tariffs will do severe damage far beyond affecting wineries themselves. Notably, they will impact wine distributors, who serve as important market intermediaries between producers and retailers. As National Association of Manufacturers president John Williams cautioned, tit-for-tat tariffs would poison these critical distribution channels.
US Customs and Border Protection issues refunds on some duties for companies exporting like products. This little-known mechanism could offer significant relief. That doesn’t make it any easier to swallow the immediate impact these tariffs will have on trade relations.