Questions on French wine tariffs!
Our post about the 25% tariff that will be imposed on the $.2.5 billion of wines imported from France, Spain and Germany as of October 18 raised some questions. We respond:
Rick: How do you suppose this will affect futures orders that are in place?
Dr. Vino: They will be hit by the 25% levy if they arrive in the US after October 18. This could lead to the smart collector’s money either (A) diverting toward wines already in the US that are available at auction (they have the added bonus of being perhaps more ready to drink) or (B) perhaps the merchant that sold you the future is prepared to hold off on taking delivery until the tariffs are called off. This trade dispute can’t go on forever, right?!
Carol: Since Italian wines are not hit by tariffs, will this be a Prosecco New Year’s Eve?
Dr. Vino: Champagne somehow dodged the tariff bullet so your choice of bubbly will be tariff-free.
Carol, with a follow-up: So will wine prices be rising this holiday season?
Dr. Vino: It is unclear if there will be price hikes on store shelves (and restaurant wine lists as soon as December). Many shops or restaurants could conceivably buy now to insulate themselves and distributor warehouses are probably pretty full in anticipation of both year-end madness and perhaps this tariff move. One rep I spoke with said their distributor is not expecting price hikes for six months. But who knows–others may not be as well positioned and have to pass these tariffs on to consumers sooner.
Jade: Should I pre-buy my wine now for the rest of the year?
Dr. Vino: Sure! I never would tell you not to! There are so many great wines in the market right now plus a lot of stores offer discounts on 12+ bottles. And you know the holidays are coming…oh, and have you seen the news recently? Oh, man…might make you want to crack into your stash.
Juliette: so will French rosé next year be 25% more expensive?
Dr. Vino: If the issue remains unresolved and the tariffs are still in place, then yes. Any 2019 wine from these three countries would be impacted–even Beaujolais Nouveau!
Leslie: How exactly do the tariffs affect the auction market? If a past vintage passes from an affected EU country will that be subject to tariff? Do auction wines now become more valuable if they are unaffected by the tariffs?
Dr. Vino: Wines in the US before Oct 18 are not hit by tariffs. So, yes, there’s a chance that if futures buyers like Rick divert their funds to collectible wines that are slumbering in cellars across America now, then, yes, there could be a bump in the auction market for French (and German and Spanish) wines.
Okay, that’s all the questions for now. But I did want to reproduce the text of the directive on French wine tariffs (and Spanish and German and UK wine): “Wine other than Tokay (not carbonated), not over 14% alcohol, in containers not over two liters.”
So weird that wine over 14% alc gets a pass! so all Chateauneuf du Pape comes in unaffected? To Juliette’s point above, maybe we will see some 14% alc roses? 😛 Also, game on for double mags of French wine! And champagne!
Also, final fun fact: $16 million of wine was imported from the UK last year! I knew it was, uh, small beer, but that is actually more than I thought!
UPDATE: this post was edited to reflect the fact that champagne will not be affected by the tariffs. Neither will cognac or handbags so a big wine for LV to the MH.
On October 4th, 2019 at 2:46 pm ,Andrew McGonigle BA Hons Arch. Dip Arch wrote:
The one question not answered by anybody: What is the dollar value of the increase? Is the 25% on import duty? Is it on the cost to the Importer? Is it on the current price to the retailer? These are all very relevant to the purchaser and currently not identified.
On October 4th, 2019 at 2:56 pm ,Dr. Vino wrote:
Hi Andrew,
Tariffs are paid by importers to the US Treasury.
When they are modest, say 10%, the importer and supplier may work to mitigate price increases to the consumer. But when they are as high as this, they are almost always passed on. So, ultimately, the consumer pays but the importer may see volumes decline, which may lead to a loss of jobs in America.
Some French producers (think: Burgundy) will be able to divert their sales elsewhere in the world but many won’t so they will also be hurt.
On October 5th, 2019 at 7:04 pm ,Liam Kirk wrote:
Quite a blow to the affordability of French wines for middle income Americans. Is this an attempt to boost domestic production? When will this global trade war end? The political climate is so nasty, one expects something big is about to happen.
On October 8th, 2019 at 8:00 am ,Terroirist: A Daily Wine Blog » Daily Wine News: 2019 Harvest Reports wrote:
[…] Colman aka Dr. Vino answers questions about the 25% tariff imposed on wines imported from France, Spain and […]
On October 8th, 2019 at 4:16 pm ,Chuck Hayward wrote:
Looks like a great time to drink Australian and NZ wines…. and not because of the alcohol levels. That visit by Scott Morrison was worth it!
On October 30th, 2019 at 9:53 pm ,jen wrote:
from what I am hearing the wine makers, importers and distributors are all working together to absorb the extra costs to keep prices steady and so as not to disrupt their market shares as this may not last forever