Wine prices Stop the first step
Retailers and producers breathe a sigh of relief after the temporary halt to a transatlantic wine war.
By W. Blake Gray | Posted on Monday 08-Mar-2021
At the end of last year, the EU and the United States were grappling with an intensifying trade war, each applying billions of dollars in new tariffs in the final weeks of the Trump administration. The root conflict over Airbus subsidies had been brewing since 2006 until Trump escalated it.
Everyone was hoping that a new US president would make a difference in easing tariffs on European wine, but most expected it to take at least a few months, or at least until a new US trade representative is sworn in.
Surprisingly, within 48 hours of the last week, all tariffs were lifted on all sides – and it happened during a direct phone call between European Commission President Ursula von der Leyden and US President Joe Biden.
Call it the art of business.
“We were all shocked when we got a call from Nancy Pelosi’s trade adviser this morning,” said jubilant Ben Aneff, president of the US Wine Trade Alliance, a grassroots organization formed to oppose tariffs. “It’s amazing. Absolutely amazing. It’s exciting.”
The deal is just a four-month tariff cessation on both sides. Meanwhile, the United States will no longer levy 25% tariffs on French, German, and Spanish wines (as well as other products, including cheeses and olive oil), and the EU will no longer levy 25% tariffs on US products, especially whiskey.
Aneff believes the two longtime allies will be able to finally settle the Airbus-Boeing dispute by then and get back to drinking each other’s good things. Aneff said it was important that the hiatus was not five months, which would have been in line with the USTR’s requirement to review tariffs in August.
“We’ve seen six-month breaks and even one-year breaks before,” Aneff said. “We have very good reason to believe that Europe and the United States are far enough along in the process to cross all t’s and point all i’s.”
Gabriel Bisio, chairman of the board of the National Association of Beverage Importers, was also pleasantly surprised, but warned that a ceasefire is not the same as a permanent agreement. Bisio said there was a possibility there could be a spike in orders this week.
“Now we have four months to find a solution. It’s a reasonable first step,” Bisio said. “There are people who may have delayed their imports. If I am the logistics manager of an importer, I want to bring my inventory to a reasonable level for what can be a negative result. You have four months. to bring the products into the United States duty-free. “
It’s less time than it looks, as the world faces a container ship shortage caused, according to a recent New York Times article, by all the products that American consumers order and are made. in China. Apparently, container ships leave other ports empty to race (as fast as container ships can run) to China to load exercise bikes, household furniture, sex toys and everything in between. used to dispel pandemic boredom.
“Container prices have increased dramatically,” Bisio said. “This will put more pressure on the logistics of shipping wine to the United States. It would be prudent to import wines now.”
UK takes the first step
The ceasefire that happened so quickly came with the UK showing the EU how to do it – right after leaving the community.
In December, just before the United States imposed additional tariffs on cognac, armagnac and French wines containing more than 14% alcohol, the United Kingdom announced that when it left the EU would be finalized, it would unilaterally lower its tariffs on American products in the Airbus dispute. The United Kingdom did so on January 1 without any guarantee of reciprocity: Scotch whiskey and English cheeses were still subject to tariffs when entering the United States.
© I love wine
It seemed likely that Biden would want to defuse tensions with Europe after taking office on January 20, but it also seemed unlikely that anything would happen before his candidacy for U.S. representation on trade, Katherine Tai, be approved by the Senate. Tai had a hearing before the Senate Finance Committee on Wednesday, March 3 and was unanimously approved by both parties, signaling that she should be installed in her post as soon as the full Senate can hold a hearing.
But on Thursday, March 4, unexpectedly, the US and UK announced a joint deal to lower tariffs on both sides together for a four-month hiatus.
The next day, von der Leyden announced that she and Biden had reached the same agreement – apparently during their very first official conversation as leaders.
“I was happy to speak to President Biden this afternoon – the first of many exchanges and the start of a good personal partnership,” von der Leyden said in a statement Friday. “As a sign of this fresh start, President Biden and I have agreed to suspend all of our tariffs imposed in the Airbus-Boeing disputes, on both aeronautical and non-aeronautical products, for an initial period of four months. . This is great news for businesses and industries on both sides of the Atlantic, and a very positive signal for our economic cooperation in the years to come. “
Bisio said there had been rumors last week in France that a deal was possible, with President Emmanuel Macron telling people in a meeting with leaders of French industries that “there was something that was going on “.
The tariffs may have worked to exert pressure. French wine exports to the United States fell 20% in value, leading to a 14% drop in French wine exports to the world, as the United States is such an important market for premium wines. Exports of German wines to the United States fell by 30% and exports of Spanish wines by 12%.
On the US side, Aneff said public pressure from the restaurant, wine and food industries had made a difference.
USTR received what we understand to be record submissions on its comment portal requesting the repeal of these tariffs, with 25,624 submissions on the January 2020 comment portal and 30,367 submissions received on the comments portal of USTR. July 2020, the vast majority of which were calling for the repeal of tariffs on food and wine, ”Aneff said. “USTR typically sees submissions in the hundreds, not the thousands or tens of thousands. The USWTA congressional campaign resulted in an additional 47,029 letters to the Congress of Wine Consumers and an additional 11,859 letters to the Business Congress, all calling for an end to these tariffs. Soon after, 164 MPs from both parties signed a letter in August 2020 asking the USTR to repeal these tariffs. “
Yet nothing would have happened without regime change in the White House. It turns out that a dealmaker can have an impact.
Now the question is: what happens to the prices of wines and spirits?
Bisio said on the lower end, you won’t see much of a difference because importers and producers have generally eaten the tariffs to maintain their storage space. Prices will stay where they are, but importers and producers will start making money on these wines again.
In the mid-range, you might see changes like more Burgundy Chardonnays at village level and fewer items trying to convince you that Aligoté is really just as good.
At the high end, you may see some prices drop as new, non-priced vintages hit stores and restaurants. But these price changes will be erratic. Nothing on the shelves is now going to get cheaper; customs duties on these wines have already been paid. As for term wines possibly purchased, their price will depend on the date of arrival of the vessel.
“The wines that were purchased for the spring shipment have already arrived and we’ve already paid tariffs on them,” wine importer / retailer Lyle Fass wrote in an email to customers. As for the next shipment, Fass wrote: “Even though we have started the process of collecting the wines from the cellars now, there is no guarantee that we will be able to get the wines here in four months (before the moratorium expires. tariff) as it normally is It takes three and a half months and the ports are blocked due to the massive increase in imports as the country recovers from the pandemic. For now, we will continue to collect money to pay 25% customs duties on French and German wines. “