Happy Hour: 2.26.20
tariffs: what they mean for your beverage
What are you willing to pay for a bottle of wine? This question has become far more relevant in the last few months due to looming wine tariffs by the European Union. Because of a disagreement between the U.S. and Europe over subsidies paid to Boeing and Airbus, a whole slew of European products have been in the crosshairs, including cheese, olive oil and liquors. A 25% tariff is in effect, although price changes haven’t hit the market … yet. Until a few weeks ago, the situation was even more dire, with threats of 100% tariffs on all wine and liquor coming from Europe. Thankfully, the U.S. and EU decided to postpone tariffs and give the negotiations another full year.
You don’t need a degree in economics to imagine how a 100% tariff might affect local businesses. A restaurant that sells Italian food and wine suddenly would see costs skyrocket. Similarly, wine distributors would be forced to increase the price of a bottle to the point that it would price itself out of the market. What would you do as a business owner if, through no fault of your own, all of your goods increased 100%? Imagine waiting on a container being shipped from overseas and not knowing if it will cost you twice the price of what you originally thought. These are completely devastating scenarios that have the potential to destroy seemingly successful businesses.
Some may say these tariffs are a good thing. Buying American is always beneficial since it supports businesses within our borders. The problem is that millions of Americans are supported by multicultural trade. Often, cheaper European wines are the workhorses in some distributor portfolios. These everyday wines allow for the current industry infrastructure, which, in turn, allows for more American wine to be sold. Take away a piece of the machine, and the other parts won’t work as well. Monetary increases on goods are only part of the problem. Products that are finite have certain allocations based on buyers. If buyers stop purchasing goods, sellers look for other markets where they will establish relationships and make promises. In these scenarios, products become more rare and expensive, and may not even come to the country at all. But Europeans aren’t really sweating potential tariffs, especially dealers of high-end French Burgundy and Bordeaux. They certainly will be able to find markets in China, which may be even more profitable.
Having choices is definitely something we take for granted. It’s nice to have cultural experiences, even if it’s something as simple as enjoying good bread and olive oil. The livelihood of millions of Americans is on the line, and everyone will be affected in some form or fashion if tariffs don’t return to normal. We will lose part of our culture, and if we do, it will be hard to get back. Let’s hope it doesn’t get that far.
Anthony Geary is sommelier at The Four Seasons Hotel St. Louis.