American tariffs on European wine may be going up sharply in the new year. In a little-observed escalation, last week US authorities proposed ratcheting up and expanding the tariffs announced in October.
These were announced and hastily implemented on October 18, imposing a 25 percent tariff on an assortment of European wines that notably excluded Champagne. This action was in response to a WTO ruling over aircraft subsidies, which gave the green light for the US to impose such levies. A second round of possible tariffs is looming that includes a 100 percent tariff on French handbags, makeup and Champagne. This round is solely against French imports and is in retaliation for a digital tax in France that targets the world’s biggest tech companies, most of them American.
On December 2, the United States Trade Representative announced a possible escalation and expansion of the aircraft tariffs. This would remove the idiosyncrasies of the October action by proposing a tariff on, essentially, all European wine including wines over 14 percent alcohol and in “containers” over two liters, categories that had been skipped in the first round. The tariffs now could be raised to 100 percent. A full list of the items affected is in this 31-page document.
“The new round is much more damaging,” says Blake Murdock, Managing Director of Rare Wine Co., which imports highly coveted wines such as Champagne Jacques Selosse and Bartolo Mascarello from Barolo.
“The twenty-five-percent tariff literally was published overnight after the WTO ruling and went into effect a short time later,” he says. “Typically there is an exclusion process for goods already on the water but that did not happen—we had millions of dollars of wine in transit at that time and had nothing to do but pay the tax on it.” He says it typically takes six weeks to get wine from France to the West Coast. Rare Wine Co. is based in Brisbane, California.
“That wasn’t a tax on the Europeans—it was a tax on us,” he says of the first round, given of the speed of implementation.
“Usually tariffs are announced six months in advance and the pain starts to be felt in the other country and their representatives come to the negotiating table,” he says.
“There’s just no way around it. Champagne sales will come to a halt in the US,” Murdock says of the second round of tariffs. They are attempting to airfreight the US allocation of Philipponnat Clos des Goisses in advance of the January 7 public hearing on that round of tariffs. Murdock says that after that hearing, President Trump has the right to implement the tariffs. Murdock points out that Europe will largely go on vacation from December 20 – January 6.
Many in the US wine trade feel frustrated.
What will happen is anybody’s guess. Last week, on the sidelines of the NATO summit, several foreign leaders—including President Macron of France—were caught on video laughing at Trump. As a result, Trump flew home a day early from the summit. Murdock thinks that the Champagne tariffs are now a fait accompli.
“It’s really bad going forward,” Murdock says. “We may go a year without shipping any Champagne.”
“They don’t even have a negotiating team in place at the USTR,” he says. “There’s nothing we can do. We have contacted our senators and congressman and they say they can’t do anything.” Highlighting the domestic political coloring of the tariffs, he says that “red state” senators might have more pull.
Brooke notes that he has penciled in February 15th as changes to the current 25 percent tariff in the aircraft dispute. This date is 120 days from the first round of tariffs in October, which he says is the stated minimum period before the rates can be adjusted.
“We are certain about only one thing—that we will remain in the wine business and remain committed to our growers, customers and employees. We will continue shipping as much wine as we think we can sell,” Brooke says.
The USTR is soliciting public comments on this latest round until January 13. Comments can be posted at regulations.gov.
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