Airplanes, Wine, and a Touch of Panic
Behind the neat shelves and handwritten price tags of City Center Wines in Boise is an undercurrent of panic.
Ever since the Trump administration announced a 25% tariff on European wines under 14% alcohol four months ago, co-owners David Hansen and Linda Lloyd have feared for their shop’s future.
“I’m just beginning to see the impact now,” Hansen said of the tariffs. “The sticker shock is already disconcerting. It’s already having me thinking about ways to increase my share of domestic products, because overnight a wine that was selling for $25 is now selling for $32, and it’s a big increase.”
Hansen, along with his importers and distributors, has absorbed much of that cost. Even so, it isn’t the tariffs that keep him up at night: It’s the impending second round, which could include a tariff of up to 100% on all wines imported from the European Union. City Center Wines sells mostly old-world bottles, and such an steep tariff could force Hansen to change his business model and raise prices.
“It’s really frightening. I would simply have to, as I sell through my current stock, replace my European portfolio with a larger percentage of domestic product. That’s going to be difficult to do because there’s only so much to go around, and also we built our entire brand on specializing in old-world wines, so we’d basically be losing our identity as a business,” he said.
Hansen is concerned about the impact such tariffs would have on the U.S. wine industry. His predictions range from job losses to the permanent disappearance of key European wines from the U.S. market, and he isn’t alone in worrying about being burned in the name of protectionism.
The Planes That Started It All
To understand the the first round of tariffs, rewind to an international battle over airplane subsidies from 2004. That October, the United States filed its case challenging the E.U.’s financial support of European airplane manufacturer Airbus. America claimed the E.U. favored Airbus with subsides and other aid to the tune of over $18 billion, hurting Boeing in the process and triggering a decade of litigation.
In October 2019, the World Trade Organization ruled that the Airbus subsidies had been unfair, awarding the U.S. the right to impose tariffs on $7.5 billion worth of European goods. The October 2019 tariffs were part of that deal. New tariffs on other European products could be another portion.
A Distributor’s-Eye View
Jeff Moore, co-owner of Garden City-based wholesaler AWC, distributes roughly 4,000 cases of European wine each year, and has been discussing the tariff threat with importers since October. Many of them are “stocking up as much as they can now” before prices rise. Moore’s biggest tariff-related worry, beyond losing profits, is that American importers could forfeit access to famous, high-demand wines if prices climb too high. If American importers don’t order them due to increased costs, they could lose wines like Domaine de la Romanée-Conti and first-growth Bordeaux to countries with growing wine demand, like China, leaving permanent holes on wine shop shelves and setting back the American wine market. Barry Devine, buyer for the Boise Co-op Wine Shop, had similar concerns.
“These [European wineries] will find other countries to sell their wines to, so we’ll lose some allocated wines long-term,” he said.
Devine also worries about prices. The last round of tariffs pushed his rosés up by a staggering $2-$5 per bottle, and a larger tariff could have even more dramatic effects. Boise restaurant Chandlers, which holds a Best Award of Excellence from Wine Spectator for its wine selection, has watched tariff negotiations closely with price in mind. General Manager David Boyle said that a 100% tariff would prompt him to hold the nearly 800 labels that Chandlers has cellared, and try to keep prices and offerings steady for diners as long as possible.
Putting Local in the Spotlight
Beyond punishing the E.U., the 2019 tariffs were also supposed to boost the U.S. domestic market. According to the Idaho Wine Commission, Idaho has 60 wineries and produces 160,000 cases of wine annually. At City Center Wines, Hansen called the potential shift from European to local wines “the only silver lining to this dark cloud,” but Earl Sullivan, owner and winemaker at Telaya Wine in Garden City, is skeptical.
“[Retailers and distributors] are some of our biggest advocates, and if they get put out of business or severely hampered, it’s not going to help us promote our business any more,” Sullivan said. “The California wineries that have a lot more resources than we do, the Oregon wineries and the Washington wineries are going to be able to push harder in the market space. ... It’s actually going to hurt us pretty bad.”
That’s without considering the possibility of retaliatory E.U. tariffs, which Sullivan claimed could price Idaho winemakers out of everything from wine barrels to cork.
A Final Reality Check
A 100% tariff on all E.U. wines remains hypothetical, and some are hopeful. As recently as Jan. 20, French President Emmanuel Macron and President Donald Trump agreed to put a different European luxury goods tariff—threatened in response to a French digital tax—on hold, though the Airbus conflict still looms. It’s equally possible that a tariff will be levied. Grapes the Wine Company Owner Daniel Posner told The Oregonian it could hit as early as Feb. 17. Locally, speculation about the likelihood and extent of a tariff runs the gamut. Even as they considered contingency plans, most wine industry players BW spoke to felt a full 100% tariff was improbable.
As Boyle put it, “I think [making a drastic threat] is the way that the powers that be right now prefer to negotiate. With the real strong-arm at 100, you’ve got a whole lot of room to backtrack from that.”
This story was originally published by Boise Weekly. Read the original here.