There has been a lot of chatter in the wine world over an astonishing possibility. The Trump administration is considering a 100 percent tariff on European wines, a sharp escalation of a more geographically limited 25-percent tariff implemented this past fall. If it goes through, the slated hike could begin later in January. So, what would this mean for you, European wine, and our local wine scene?
For starters, the tariff would double the price of European wines.
This would hamstring European vineyards, U.S. importers, distributors, wine shops, restaurants, other corners of the hospitality industry, and even areas like beverage advertising. Wine would become more expensive from, among other countries, the three largest wine producers in the world: Italy, France, and Spain. Bottles you enjoy now would soar above your price ceiling. People would buy less wine, meaning jobs might be lost.
One local wine pro bracing for potential change is Chris Lingua of Sauvage, a cult-favorite, natural-leaning wine shop in The Churchill. Lingua is known for carrying eye-opening, rare finds at friendly prices. “A lot of importers that bring in a lot of the wine I buy wouldn’t be able to exist,” he says.
When the 25 percent tariff went live in October, a tariff that applied to just a small fraction of Europe, Lingua says that the link preceding him in the chain of distribution — the distributors — absorbed added costs. For the possible January 2020 tariff, distributors are moving differently. “Some of them loaded up before to hedge their bets at the pretariff price,” he says. “Other people are loading up on domestic producers, to sell more U.S. wine.”
Lingua's shop features a cork display wall; mounted columns of wine bottles are organized by price: $15, $20, and so on. “I’m not going to be able to take the wines I sell for $15 and sell them for $30,” he says. “They’re just not $30 wines.” To stick with his price model and laser-focus on low-intervention wines, he’ll have to alter what he buys. For one, he says he might look more to the Southern Hemisphere.
Pavle Milic, beverage director at FnB and founder of Los Milics Winery, sees the tariffs from another vantage. He has a reputation for devising wine lists with a rich range of Arizona wines. From one angle, the tariff would seem to benefit him and Arizona wines, which tend to be expensive. Could the tariff make Arizona wines more price-competitive? Could it boost our local wine scene?
“At face value, if we’re talking about a locavore movement or peddling what’s in our backyard, the tariffs would seem to be a great thing,” he says, noting that people might buy more Arizona wine. “But I think the issue is far more complex than that.”
He sees the issue as global. “If they were to impose these tariffs, so many businesses nationwide would be affected. Right away, people are going to start looking at different markets to export their goods rather than the United States, like China.”
He sees the issue as antithetical to FnB’s Arizona-centric mission, even if tariffs might provide some benefit to Arizona wines. “It might help what we’re trying to do at FnB, but at the expense of whom?” Milic says. “I don’t think these tariffs will bring a sustainable ecosystem for a thriving economy. At the end of the day, we’re in the business to take care of each other.”
Tariffs likely would present big obstacles to some of the smaller cogs in the greater industry apparatus. Ryan McLaughlin of Stem Wine Company is a family-owned distributor active from Tucson to Flagstaff. “I don’t think people will pay for Burgundy and Champagne that’s already expensive, to say nothing of the tempranillo that goes from $8 to $16," he says.
In 2019, European wine accounted for 30 percent of his case volume sold and 32 percent of revenue. Because he provides proprietary label wines to entities like Postino and Fox Restaurant Concepts, he estimates that his domestic wine numbers, even at about a third of his totals, are on the high side for a distributor. Most are likely to traffic more European wines.
McLaughlin believes that, if passed, the tariff would turn much of his European sales into a void. “I think we’ll be able to pivot some of that volume and revenue, but it will without question affect our numbers,” he says.
Other distributors and importers won't be able to seek wine from other continents, executing pivots. Some of the America-based European importers McLaughlin works with do 100 percent European wines. “They will be dramatically affected,” he predicts.
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McLaughlin thinks that change would also come at the level of domestic production. He believes that big U.S. producers would rush to pump out industrially produced wines to fill the market void that would be created by tariff-ballooned European wine prices.
“Ultimately, the U.S. consumer is going to suffer and small businesses are going to suffer," he says.
The 100 percent tariff would extend to countries not included in October’s 25 percent tariff, like Italy, Ireland, and even Hungary, Estonia, and Romania. Foods beyond wine would fall within the tariff’s reach, including cheese, olive oil, and Irish whisky.
To share your thoughts on the tariff with the Office of the U.S. Trade Representative, you can write in until the window for comment closes on Monday, January 13.