Why Tariffs on Imported Wines are Bad for Wineries
Follows is a copy of the comments we submitted to the Office of United States Trade Representative regarding the proposed 100% tariffs on European wine:
As the owner/operator of a small winery in Oregon’s Willamette Valley, I urge you to consider the unintended consequences of the potential increased tariffs on European wine. Although on the surface it would seem like we should be embracing these actions, the reality is that the risks of negative impact on our business far outweigh any potential benefits. There is certainly a case to be made that the tariffs will result in significantly higher prices for wines imported from Europe, making domestic wines more attractive to US consumers. But that reflects a naive understanding of the dynamics of the domestic wine market. While it is certainly possible that some wine connoisseurs who routinely purchase $50 bottles of Red Burgundy might be more tempted to try one of our Pinot Noirs when the price of that bottle goes up to (say) $80, this “win” will be offset by the major “losses” caused by the chaos that these tariffs will create in the distribution channel.
We currently sell more than half of our wine through 20 distributors in different parts of the country. All of these distributors have portfolios that contain at least some (and in some cases mostly) European wines. These are mostly small businesses that have developed direct relations with European winemakers over many years, in some cases over multiple generations. Selling those imported wines represents a significant portion of their sales, without which their businesses are no longer viable. There is absolutely no way for these companies to absorb the impact of the increased costs resulting from these tariffs. At a minimum, it will be a enormous distraction for both management and the sales force, and will severely hamper their ability to effectively represent our (and other domestic) wines. Our business (and that off most domestic wineries) is dependent on a healthy and robust distribution channel. These tariffs will wreak havoc on that resource, with little if any offsetting benefit.
Please reconsider this ill-advised tactic that will cause catastrophic collateral damage in the domestic wine market.
Brian O’Donnell – Winegrower