Sommeliers on the March as Trump Tariffs Threaten Chianti, Rosé

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Sommeliers, wine importers and restaurateurs are taking to the streets of Washington on Sunday with a message for U.S. Trade Representative Robert Lighthizer: “Keep your tariffs off our Beaujolais.”

The march is a last-ditch effort to stave off the threat of tariffs as high as 100% on a range of European products including wine, cheese and olive oil that could be announced as soon as this month.

The levies could make the items too expensive for American consumers, decimating the market for those products and causing restaurant, retail and distributing job losses, advocates say.

“We didn’t ever think we were going to be organized like this,” said Erik Segelbaum, one of Food and Wine Magazine’s picks as Sommelier of the Year in 2019.

Segelbaum realized he needed to shift his focus from tannins to trade policy in October when the World Trade Organization said the U.S. could legally impose tariffs on $7.5 billion of European exports in retaliation for Europe’s aid to Airbus SE at the expense of U.S. plane-maker Boeing Co.

Whisky and Olives

Washington imposed 10% duties on Airbus aircraft and 25% tariffs on certain European consumer exports in October -- Scotch whisky, French wine and Spanish olives among them. The USTR threatened in December, after the WTO ruled that the EU hadn’t removed its subsidies, to broaden those measures to all European wine and other goods, including some cheeses and meats, and ratchet up the levies to as high as 100%.

“Strong action is needed to convince the EU that its interests lie in eliminating these market-distorting subsidies now and in the future,” the USTR said in a December statement. A spokesman for the office didn’t respond to a request to comment about the timing of any new tariffs.

The wine industry fears escalating hostilities in the decades-old feud over airplane subsidies could see French and other European wines double in price in the U.S., effectively killing the market for them.

“We’re collateral damage,” said Kevin Rapp, an importer and distributor specializing in Italian wines who organized Sunday’s march.

Not Paying Double

What’s now a $9 glass of wine and a $20 pasta entree could end up costing more than $70 in a restaurant after accounting for the tariffs on all the components plus markups as they make their way from the importer, distributor and retailer to the consumer, Segelbaum said.

“Even as a lover of wine, I’m not going to pay more than double,” he said.

The looming tariffs are compounded by another potential sanction, this one on French sparkling wine and other products, that the U.S. has threatened against France for passing a tax targeting large tech companies, including Alphabet Inc.’s Google and Facebook Inc.

President Donald Trump and French President Emmanuel Macron have agreed to postpone any trade levies until the end of the year.

Still, levies tied to the Boeing-Airbus dispute are not guaranteed. European Union Trade Commissioner Phil Hogan said at the World Economic Forum in Davos in January that he didn’t expect the U.S. to raise the tariffs while the two parties are negotiating a trade deal.

Even if the USTR does nothing this month, the 25% tariffs already in place on French wine are eroding access to those products as France increasingly exports to China, said Harry Root, a wine distributor with operations in South Carolina and Alabama.

Unreliable Partner

In November, the first full month after tariffs on French wine took effect, the U.S. imported about half the volume it had for the previous months of the year, according to data from Global Trade Atlas. Chinese imports of French wine rose by 26%, the figures showed.

“We are an unreliable trading partner at this point,” Root said. “We are taking relationships that go back decades, in some cases to World War II, and just throwing them in the garbage.”

Although domestic labels could logically be a winner from tariffs, there’s actually not much upside for U.S.-made wine in the spat, Rapp said. He’s looking to replace Italian brands that would no longer be economical with wine from South Africa or South America. U.S. wine producers have higher labor costs and limited supply that make it hard to make up for the loss of overseas imports, he said.

“A lot of people think, ‘oh boohoo, a bunch of wealthy elitist snobs will have to pay more for wine,’ and their second thought is ‘this will be good for American wines.” Segelbaum said. “That’s not true.”

Mirror Image

There’s another risk looming for U.S. wine producers. A WTO ruling expected this summer may give the EU with the right to retaliate against American goods in response to U.S. subsidies for Boeing -- a kind of mirror image to the ruling against the EU and Airbus. That could put California wine in the cross-hairs; its top export destination -- $469 million worth in 2018 -- was the EU, according to the U.S. Wine Institute.

It’s the mix of business risk and civics lesson that inspired Guy Harris and his 17-year-old son to travel to Sunday’s march from Washington state, where he owns Cru Selections, a wine importing and distributing company.

Harris is familiar with Washington -- he used to work at a political non-profit in the nation’s capital -- but he left the area more than 20 years ago and has been working in the wine industry since then.

“I didn’t ever think these two things would align,” he said.

To contact the reporter on this story: Laura Davison in Washington at ldavison4@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Ros Krasny, Ana Monteiro

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