American wine and spirits importers are shaken by the possibility that the Trump administration may impose additional tariffs on the European Union.
This month the Office of the U.S. Trade Representative (USTR) said it will consider increasing an existing 25% U.S. tariff on certain European-origin alcohol product imports to 100%.
The USTR imposed the 25% tariffs on wines and spirits from the EU in October 2019 in response to the ongoing U.S.-EU trade dispute in the World Trade Organization over subsidies for Airbus (OTCMKTS: EADSY).
The latest threat by the U.S. to implement 100% tariffs on certain alcoholic beverages, specifically French champagne and sparkling wine, follows the Trump administration's opposition to the recent passage of the French Digital Services Tax.
"The imposition of additional U.S. duties on sparkling wines from France alone would cause significant economic harm to the alcohol industry and may result in more than 17,000 U.S. jobs lost," warned the Wine & Spirits Wholesalers of America (WSWA) in a letter to members urging them to ask Congress to oppose the new tariffs. "This includes importers, producers, distributors/wholesalers, retailers, as well as the related jobs throughout the distribution chain, such as shippers, truckers, warehouse workers, bookkeepers and accountants, sales representatives, customs brokers, managers, hospitality, and others."
The wine and spirits industry in the U.S. says it supports 1.3 million jobs, paying about $7.5 billion in annual wages nationwide.
"As consumer demands have evolved and changed, wine and spirits wholesalers have diversified portfolios with products from around the globe to meet every taste, budget, and occasion — driving growth and creating myriad job opportunities for U.S. workers," WSWA said.
The trade association warned that the increased tariffs on French wines and spirits could result in further negative economic effects. The EU's 25% retaliatory tariff on American whiskey, for example, resulted in a 29% decrease in exports to Europe last year, formerly the largest import market for American whiskey at $704 million in 2018, WSWA said.
"A tariff on champagne and sparkling wine from France will significantly increase pressure on the EU to impose additional tariffs on United States distilled spirits and wines," WSWA said. "We cannot emphasize this enough — there will be negative, long-lasting consequences felt across our country."
Source: SONAR Freight Market Dashboard.
The USTR on Jan. 7 held a public hearing in Washington regarding the proposed tariffs in response to France's digital services tax.
A coalition of wine and spirits trade associations, including WSWA, Distilled Spirits Council of the U.S., Wine Institute, WineAmerica, American Beverage Licensees, American Craft Spirits Association, American Distilled Spirits Association, Kentucky Distillers' Association, National Association of Beverage Importers, Wine and Spirits Shippers Association, and National Restaurant Association, sent a letter on Jan. 13 to USTR General Counsel Joseph Barloon, urging the Trump administration to remove tariffs on EU alcohol beverage products.
"Our EU counterparts share our strong opposition to the application of any tariffs on distilled spirits and wine and are urging their governments and the [European] Commission to secure an agreement to eliminate these tariffs as soon as possible," the coalition said.