Tariffs and the Wine Industry

What are the likely effects of the American tariffs and retaliatory tariffs on the American wine industry? This is educated guesswork, but we'll know for sure if the tariffs are still in place in a few months.

Why should you care? Besides price increases, there are well over a million jobs at stake.

 

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Wine Production

Wine bottles, corks, barrels, and wine making equipment are mostly imported. 

Wine bottles

A lot of bottles are produced in America, mostly on the West Coast. Europe and China are also big producers. I don't know what percentage is imported, but 70% of all American glass is from China.

Corks

Most of the world's cork comes from Portugal and Spain. Synthetic corks and screw top are generally made in the USA, though their raw materials might be from elsewhere.

Wine barrels

Almost all red wine and some whites are aged in oak barrels. French oak is considered the top barrel material, though other European countries and the US produce barrels from local forests. French oak is predominant in California premium wines.

Wine making equipment

This is mostly an infrequent capital expense. There are US manufacturers of tanks, presses, sorters, etc., but much is from Canada or Europe.

 

Wineries' problems

• US wineries have lost overseas markets. Canada was the biggest importer of California wine. The UK was #2.
  
  
• Supply chain disruptions are possible, meaning wineries may not be able to get what they need when they need it.
  
  
• Increased costs passed on to the consumer at a time when the business is already hurting from a slowdown in sales.
  
  
• There's a likely slowdown in visitors to the wine country. Domestic visitation will slow down depending on cost increases and recession fears. Canadian visitation will be down as they are canceling trips to the US. This is likely to lead to layoffs or at least less seasonal hiring in wine tourism.

Consumer wine sales

If prices go up as much as expected, wine consumers will have to make the decision to pay the extra while not getting anything extra, or look to domestic wines. 

Will the wholesalers/importers opt to eat part of the price increases to keep sales afloat?

American jobs

Direct employment in the US wine industry is over 1,000,000 jobs. Indirectly, there are another 360,000 jobs also on the line. In California alone, it's 325,000 directly employed by the wine business and another 115,000 indirectly, as suppliers and such.

As already mentioned, there's a likelihood of less visitation to wineries this summer. Hotels, restaurants, wineries, and all those that support them will be hurt. Grape growers will continue to be affected if sales slow more.

If wholesalers, importers, and retailers have significantly slower sales, there will be job losses.

 

A possible good side?

Will more expensive imported wines mean higher sales for California wines? This seems the most likely scenario, but it depends on domestic price increases and a possible recession.

 

It will be an interesting summer. As a wise man once said,