Los Angeles
CNN
—
Last week, President Trump threatened to impose a jumbo 200% tariff on all wine, Champagne and other alcoholic products from the European Union, writing on social media: “This will be great for the Wine and Champagne businesses in the U.S.”
But many winemakers and grape growers in California, which has the lion’s share of US wine production, view the proposal with a sense of unease. While some are cautiously optimistic the tariffs could revive interest in California-made wines, others worry tariffs threaten to upend a fragile industry already contending with faltering demand and crop destruction from recent wildfires and droughts in the state.
“Even though we’re a farming family business, there’s a global link,” said John Williams, the founder of Frog’s Leap, a winery in California’s Napa Valley. “This is not good for our industry in general.”
Alcoholic beverages are one of the EU’s top exports to the United States, according to EU data. Tariffs would almost certainly make European wine and other alcoholic beverages cost more for the average American ordering wine from a restaurant or shopping in their local liquor store.
Trump’s 200% tariff proposal marks one more escalation in the growing trade spat between the two sides. Trump has also imposed a 25% tariff on all steel and aluminum, including imports from the EU. In response, the EU announced countermeasures, including a 50% tariff on American whiskey, that will roll out in April.
Williams, who has been in the wine business for 45 years, said he feared tit-for-tat tariffs would hurt wine distributors — the middlemen who purchase wine directly from producers and sell it to retailers and restaurants.
“We all rely on the same distributors. The health of those businesses is important to wineries all over the world,” he said.
Williams’ business also exports wine to Canada, another country embroiled in trade conflict with the United States. As tensions between the neighboring countries have escalated in recent weeks, some stores have pulled American alcohol brands off the shelves.
“We need to sell all the cases we can,” Williams said. “We don’t need business interruption right now.”
Overall, demand for wine has been in decline as Baby Boomers get older and make way for younger generations who consume less alcohol, according to a recent report from Silicon Valley Bank. The report estimated that total wine category sales would have negative volume growth of between minus 3% and minus 1% in 2024.
That decline in demand has especially hurt smaller family-owned wineries and farms in California, said John Duarte, a former Republican Congressman who runs a family farm and grape vine nursery.
Larger alcohol corporations that both import and export wine won’t suffer as much from a tariff on EU wines as smaller businesses, Duarte said. That’s because US Customs and Border Protection offers refunds of certain duties, taxes and fees paid on imported items, so long as a company exports similar items. Duarte said the tariffs may have the unintended effect of encouraging large alcohol brands to import more European alcohol, at a higher price, in order to maximize the refunds they get when exporting similar items.
“At first, you want to be thankful that President Trump is standing up for the domestic wine industry. That should be a good thing,” Duarte said. “But this 200% tariff on top of other excise 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.”
Duarte said that while he agrees that some trade between the United States and EU is unfair, the solution needs to be handled “much more carefully.”
Not all winemakers in California believe Trump’s tariffs will be a net negative on business, though.
Bruce Lundquist, the co-founder of Rack & Riddle, the largest sparkling wine producer in the United States, is hopeful the tariffs would raise interest in his company’s product.
In 2023, France shipped almost 27 million bottles of Champagne to the United States, making it the top destination for exports of the sparkling beverage, according to Comité Champagne, an industry trade association.
But a 200% tariff on Champagne imports — and the price hike that would likely go along with it — would be a “devastating blow” to that market, said Lundquist.
“Nobody wants a trade war. I don’t know if that’s in anybody’s best interest,” Lundquist said. “But it would probably boost business for domestically made sparkling wines.”
“Most of these operations are relatively small, usually family-owned and employ a lot of people in their communities,” he added. “It would certainly be refreshing for American consumers to refocus on the wine products produced here in the United States.”
