President Trump is facing backlash from California’s wine industry over his threatened plan to impose a massive 200% tariff on all wine, Champagne, and other alcoholic products imported from the European Union. This proposal, announced on social media, was intended as a boon for U.S. wine businesses. Trump stated, “This will be great for the Wine and Champagne businesses in the U.S.” However, many local winemakers are responding with unease as they grapple with the potential consequences of such a drastic tax.
California produces a significant portion of the U.S. wine supply, and a number of producers fear that these tariffs could spell trouble for an industry already battling challenges such as declining demand and crop damages inflicted by recent wildfires and droughts. John Williams, the founder of Frog’s Leap winery in Napa Valley, voiced his concerns, saying, “Even though we’re a farming family business, there’s a global link. This is not good for our industry in general.”
Current data shows that alcoholic beverages represent one of the European Union’s largest exports to the United States, indicating that a tariff would substantially increase costs for American consumers seeking to enjoy wine at restaurants or liquor stores. Coupled with an existing 25% tariff on steel and aluminum imports from the EU, tensions are high regarding trade between the two markets.
As if the situation weren’t complicated enough, the EU has announced that it will impose a retaliatory 50% tariff on American whiskey starting in April 2025. This escalation could exacerbate the already volatile industry, according to many stakeholders. Williams, who has been invested in the wine business for 45 years, pointed out how the domino effect of tariffs could create significant strain on wine distributors—the middlemen who facilitate sales between producers and retailers. He warned, “We all rely on the same distributors. The health of those businesses is important to wineries all over the world.”
Adding to the turmoil, it appears that some Canadian retailers are already withdrawing American alcohol brands from their shelves due to rising tensions in U.S.-Canada relations stemming from these tariff disputes. “We need to sell all the cases we can,” Williams added. “We don’t need business interruption right now.”
The broader trend in consumer behavior is another significant factor affecting the industry. According to a report from Silicon Valley Bank, wine consumption is in decline, with younger generations drinking less than their Baby Boomer predecessors. The report predicts negative volume growth for 2024, estimating a decrease of between minus 3% to minus 1% across the wine category. This shift has particularly impacted smaller family-owned wineries and farms in California.
John Duarte, a former Republican Congressman who now runs a family grapevine nursery, criticized the disproportionate impact that tariffs could have on smaller businesses compared to larger corporations. “Larger alcohol corporations that both import and export wine won’t suffer as much” from these tariffs, he noted, due to U.S. Customs and Border Protection providing various refunds on duties that larger companies can leverage. He further explained, “At first, you want to be thankful that President Trump is standing up for the domestic wine industry. That should be a good thing. But this 200% tariff on top of other excise taxes and tariffs that are in place already is a giant advantage to the global wine companies that do importing and exporting from the United States.”
Despite these concerns, not all winemakers view the tariffs as purely detrimental. Bruce Lundquist, co-founder of Rack & Riddle, the largest sparkling wine producer in the U.S., expressed optimism that increased tariffs on imported wines could lead to greater consumer interest in domestic products. He referenced Comité Champagne, an industry trade association, which reported that France exported nearly 27 million bottles of Champagne to the United States in 2023, marking the U.S. as the top market for this sparkling beverage.
However, Lundquist cautioned against the potential impact of a 200% tariff on Champagne imports, calling it “a devastating blow” to that market. “Nobody wants a trade war. I don’t know if that’s in anybody’s best interest,” he said. In a unique twist, he also acknowledged that tariffs could boost sales for American-made sparkling wines as consumers might turn to local options in light of increasing import costs. “Most of these operations are relatively small, usually family-owned and employ a lot of people in their communities. It would certainly be refreshing for American consumers to refocus on the wine products produced here in the United States,” Lundquist added.
The proposed tariffs have ignited a fiery debate within the California wine industry as stakeholders weigh the potential for both risk and opportunity. Amidst the uncertainty, the overarching concern remains: how will these policies affect not only the wine business, but also the broader landscape of trade relations with the EU?
