Trump tariffs could push EU wine prices up 15%

The new tariffs introduced on EU goods by the US could push up prices for French and Spanish wine by 15%, according to the latest Rabobank report.

It follows the introduction last month of a 25% ad valorem tariff on still wine under 14.1% ABV that had been made in France, Germany, Spain and the UK, transported in containers of 2 litres or less, as part of the continuing dispute over unfair funding for EU civil aviation company Airbus at the expense of its US rival, Boeing.

Sparkling wine, higher alcohol, fortified wines, and wines sent in bulk, as well as wines from Italy were not included as part of the measures.

Rabobank’s global beverages strategist Stephen Rannekleiv said that for many US importers and suppliers there many there was “no way around” the issue.

“Some players may set up mitigating strategies, like exporting in bulk or notching up the ABV. However, for many, there is no way around increasing prices or absorbing the extra cost, meaning revenues and margins will be dented,” he said.

French and Spanish wine are set to be disproportionately affected, Rabobank pointed out, with the US market accounting for around 18% of France’s wine exports, and around 12% of Spain’s. Germany and the UK will be less affected as they export less wine – only 10% of Germany’s exports are to the US, while the UK’s exports predominantly sparkling wine to the US, which is exempt.

However, around 60% of wine sales from France and Spain to the US will be affected by the tariffs, the Wine Quarterly said.

“The tariffs will force wineries to make difficult choices between sacrificing margins by absorbing the increase or passing on the costs and losing hard-won market share that can be difficult to regain,” it noted.

Speaking to the drinks business for our upcoming Spanish wine supplement, Rabobank’s Maria Castroviejo said there would potentially be a “significant and adverse” impact for Spanish wineries of the US tariffs.

“If we look at what the US imported in 1H 2019, we can conclude that 60% to 65% of the exports of Spanish wines to the US in value terms will be affected by the tariffs,” she said.

“Sellers are left with two options: leave prices unchanged and assume all the tariff as an extra cost (with the resulting impact going directly against their profits) or increase prices, which can make their products less attractive. Buyers may shift into other products. This would result on lower sales and again a direct impact on the profitability of Spanish wineries.”

The move has already prompted online wine auctioneer, iDealwine, to “seriously question” its planned American investments.

On 16th October, the The World Trade Organisation (WTO) formally granted the US authorisation to implement tariffs on a number of goods made in the EU, including wine, Scotch whisky and liqueurs.

This followed months of President Trump threatening multiple tariffs on EU goods over the long-running Airbus-Boeing trade dispute, with Trump also annoyed at the 3% levy France imposed on digital companies – including big American ones such as Amazon and Facebook – back in July. When this was announced, he tweeted that he had “always said American wine is better than French wine”.

Representatives of the US wine and spirits industry responded that it risked becoming “collateral damage” in the US’s ongoing spat with the EU over civil aviation, representatives of the industry warned the US Department of Trade this week, arguing that retaliatory tariffs could result in up to 78,000 US jobs being lost.