How Trump’s Tariffs Will Impact Wine Drinkers and Producers

The last few decades have been a glorious time for wine lovers in the United States. Consumers have had access to an unparalleled diversity of choices from around the world.

This golden era may soon end as President Trump’s new tariffs take effect, raising prices on virtually all wines, foreign and domestic.

Beginning this month, wines and all other products imported from the European Union will be subject to 20 percent tariffs. Products from other popular sources for wine like Argentina, Chile, Australia and New Zealand will face 10 percent tariffs. The tariff on South African products will be 30 percent, and on Israeli products 17 percent.

The prices for all these wines will rise. How much depends on whether the chain of importers, distributors, retailers and restaurants absorbs any of the additional cost.

Pretty much everybody in the American wine world stands to lose something. It’s not clear who gains.

American wine producers might seem to benefit, and they may for a time gain a larger share of the domestic market. But prices for American wines, too, will rise, as distributors, most of whom also depend on imported wines, try to make up for lost profits.

Most American winemakers also rely on imported products, like barrels, corks, bottles and farming and production equipment. Prices for those goods will also rise because of the tariffs. Those hikes will be reflected in the price of the wine.

The biggest loser will be the American wine culture, which is built on an intricate global network of small businesses, including wine producers, importers, distributors, retailers and restaurants, along with consumers. Mass-market wines, made by corporate producers, most likely have the financial flexibility to withstand the pressure of higher prices and smaller profit margins. Small producers are far more vulnerable.

“My biggest fear if this goes on long term is that the wine-drinking environment will be a lot less diverse,” said Carson Demmond, founder of Rive Gauche Wine Company, which distributes European, American and other wines in Georgia. “A lot of the small producers we have access to may be disappearing from the shelves. We don’t have plans to drop any producers, but with price increases, it may be hard to keep them in the mix.”

Ms. Demmond’s business is already feeling the pain. After March 13, when Mr. Trump threatened to impose 200 percent tariffs on all alcoholic beverages from the European Union in retaliation to 50 percent tariffs on American whiskey announced by the European Union, Ms. Demmond, like many other small distributors and importers, canceled orders for wines that would have been subject to that enormous charge.

“That put us way behind schedule,” she said, citing French rosés, which are big summer sellers. “Twenty percent is obviously a better number than 200 percent. We need the wines, and I’ll probably put in the orders. But there’s a world of difference to my sales team between receiving orders in May versus July.”

Ms. Demmond said she has discussed with importers and wine producers whether they could all absorb some of the price increases.

“They’ve expressed openness to alleviating some of the pain,” she said. “But they’re also small businesses working with small margins, and they need the money.”

She fears that if the 20 percent hike is passed along to consumers, they’ll choose something else to drink. She’s not alone.

The tariffs come at a difficult time for the wine world. Sales have been slumping, wineries are closing, public-health advocates have suggested that any consumption of alcohol is unhealthy, and climate catastrophes have raised the level of anxiety each growing season.

“I think the tariffs ultimately accelerate declines in consumption,” said Stephen Rannekleiv, a global beverage strategist with Rabobank, an international banking and financial services company.

Mr. Rannekleiv said that American producers are sitting on an excess in wine, and that the tariffs might help them sell it off in the short run. But in the years ahead, he said, American producers will still have difficulty competing with imports, particularly with lower-priced wines. The net effect of Mr. Trump’s policies, he said, will be to raise prices.

“You are already reducing the supply of immigrant labor,” he said. “It will push up labor costs, which will ultimately result in rising costs for wine that will likely push folks out of the category.”

Even if the tariffs only stay in effect for a short time, Mr. Rannekleiv worries about long-term damage to American exports.

“These are not going to open up export markets for us,” he said. He mentioned Canada, where American wines and other alcoholic beverages have been pulled off the shelves in response to Mr. Trump’s tariffs.

“It’s our largest export market, and we’ve certainly soured that,” he said.

Small restaurants, particularly those that specialize in European cuisines, are in a difficult position. Andrea Màncin is an owner and wine director at two Brooklyn restaurants, La Rina Pastificio e Vino in Fort Greene, which offers a list of 500 selections, almost entirely European, and Briscola Trattoria in Crown Heights, which has an entirely Italian list of 50 bottles, except for one Champagne. He also relies on other Italian products like cheeses and flour to make pastas.

“Obviously, I’m super worried,” he said. “Our margins for the restaurant depend on wine. It’s definitely the engine of the restaurant.”

He said 20 percent tariffs are perhaps absorbable, while 200 percent would have been disastrous. And he’s planning to do what he can to make the new economic situation work.

“If we have to buy more American wine, we’ll buy more American,” he said. “We’ll change the structure of the list if we have to, and maybe buy more minor Italian denominations where prices won’t be so high. We’ll try to make it up with our knowledge and staff training.”

Chris Leon, owner of Leon & Son, a wine shop in Brooklyn, said the unknowns were the scariest part. He doesn’t know yet which of the entities he buys wine from will work to absorb some of the costs and which will simply pass them on. He’s particularly concerned about lower-priced everyday wines like Argentine malbec and New Zealand sauvignon blanc. These are the sort of bottles that people buy frequently because they’re perceived as good values, but with higher prices, they may have second thoughts.

“I need to make a certain amount to pay for my staff and overhead,” he said. “The person who really ends up hurting is the consumer. Maybe they spend a little more or buy a little less. If it’s both, I’m in trouble.”

Higher-end consumers, with more discretionary income, Mr. Leon said, will be less affected. “You’re going to have some very creative solutions, which is the silver lining,” he said, referring to ways producers might try to finesse the tariffs. “Or you’re going to create a black market.”

Peter Andrews is perhaps in the most difficult position of all. He is the head of Culture Wine Company, which imports only wines from South Africa, which, at 30 percent, is the highest tariffed of all wine-producing countries.

“Yesterday was a massive hit in the face,” he said.

He said he spent the last 12 hours on the phone with his producers discussing how to deal with the new charges. “Thirty percent for me would not be doable,” he said. “Most seem willing to meet in the middle where they take a hit and I take a hit to keep the products on the shelves while this settles out.”

The hardest thing, he said, is planning for the future.

“No business leaders in any industry can act on this with any clarity,” he said. “You have to plan and react to something that makes no sense in the first place.”