Earlier today, President Trump, who has been open about his disdain for alcoholic beverages, threatened a 200% retaliatory tariff on all European alcoholic products unless EU leaders back off their threats to impose 50% tariffs on, among other products, American whiskey.
I'm sure there is a new lexicon being incubated right now that will help differentiate between a first salvo tariff, a reciprocal tariff, a retaliatory tariff, and a tariff in response to a reciprocal or retaliatory tariff. In the meantime, if there's one thing we've learned from observing the President, it's that he should not be taken at his word. So, before anyone runs to their local retailer to stock up on Spanish, Italian, French, and other European wines, this could very well be just another attempt at intimidation in a long sequence of menacing "diplomatic" actions.
Platitudes like this do nothing to quell the instant appearance of ulcers for those actually in the wine industry. Those good folks are shitting their pants right now - or at a minimum holding their breath.
The obvious implication is that such a price hike would grind all European imports to a halt. Given the size of the US market (it's common for many European winemakers to export 60% of the bottles to the US,) that would certainly create EU-wide pain. But it wouldn't stop there.
Anyone here in the US whose job is on the receiving end of those imports - importing, distributing, marketing, or retailing these products, and many of which are specialized in one or two European countries - will similarly be affected. There just isn't enough margin and capitalization is most of these companies to withstand such a hard slam on the brakes - even if only temporary. Entire businesses would cease to exist virtually overnight. We're talking job losses and bankruptcies in industries beyond wine, too, like transportation logistics, shipping, etc.
Unfortunately, the blood-letting would not stop there. Part of the continuation of destruction would have to do with the precarious slide the US wine industry has been on for the past decade. And part of it with simple economics and consumer choice.
In an article on Meininger's International last month, Jeff Siegel did a good job detailing how the wine industry has effectively disenfranchised a new generation of drinkers. Prices have continued to outpace inflation, shoving demand downward. In a nutshell, things have not been looking good.
So, onto this shaky foundation, we now have the possibility of a radical slashing of supply. Gabriel Picard from the French Federation of Exporters of Wines and Spirits was quoted this morning by the AP as saying, "All exports to the United States will come to a total, total, halt.”
There's simply not enough wine made on the west coast to fill the void that would be created by a total European halt. So, what then? When you cut supply, prices rise. On the backdrop of a domestic industry that's been alienating its customer base with price hikes for years, this could be the last straw for wine drinkers who have been the backbone of the business for decades.
Many younger/Millennial consumers see wine as interchangeable with beer, cocktails - even cannabis and (gasp!) abstinence. If that sentiment becomes contagious, watch out.