Wine tariffs update 2

Jason Haas, Tablas Creek Vineyard in Paso Robles, Calif., at his vineyard. Haas says that although he's relieved the threatened 100% tariffs were avoided, it's premature to celebrate yet.

SALEM — Last Friday the Trump administration sent the wine industry a mixed Valentine: relenting from its threatened 100% tariffs on European wine imports for now but maintaining still-unfavorable 25% tariffs.

U.S. Trade Representative Robert Lighthizer issued the decision Feb. 14 not to raise tariffs on European wines to 100%, opting instead to increase duties from 10% to 15% on European airplane parts. The duties are part of a decades-long dispute between the U.S.  and the European Union over U.S. objections to government subsidies to Airbus, a plane manufacturer.

Many in the U.S. wine industry celebrated the decision.

"Everybody's relieved that, at least for now, there aren't 100% tariffs," said Jason Haas, manager of Tablas Creek Vineyard in Paso Robles, Calif. "It would've had catastrophic effects on the infrastructure of how wine is sold, and I know a lot of people that would have been put out of business. The fact that it's not happening now means this is not an extinction event."

It might seem logical that a duty on European wines would lift U.S. producers' profits, scrubbing out competition. But U.S. winemakers say a 100% import tax would have crushed the domestic industry by raising prices for consumers, damaging the overall wine-drinking culture and shutting down distributors.

Leaders from winegrowers' associations in Oregon, Washington and California told the Capital Press that for the past few months,  the wine industry had braced for the worst.

Wine groups that typically compete against each other, such as wholesalers and retailers, united for a common cause, lobbying against the tariffs on Capitol Hill. It appears they were heard.

The decision, however, may not be permanent. By law, according to the White House, the Office of the U.S. Trade Representative (USTR) must review enforcement actions 180 days after implementation. This means the USTR must re-evaluate the tariffs by August.

In the meantime, according to the notice, the USTR has chosen to maintain a 25% tariff on all wines from France, Spain, Germany and the UK, except sparkling wines, large-format bottles and wines with more than 14% alcohol.

These 25% tariffs were imposed in October, immediately after the World Trade Organization gave the U.S. permission to place duties on $7.5 billion worth of European goods to "punish" the E.U. for its Airbus subsidies.

U.S. wine industry leaders say that although they are relieved the 100% tariffs weren't levied, the 25% tariffs still hurt.

"Wine tariffs remaining at the status quo is a testament to the hard work put in by the wine industry, but it’s still a shallow victory," the U.S Wine Trade Alliance said in a statement. "The administration’s refusal to remove the current 25 percent tariffs on select European wine will continue to hammer American business owners and consumers."

According to a study commissioned by the Wine & Spirits Wholesalers of America (WSWA), as a result of current tariffs, the U.S. alcohol beverage industry may lose almost 36,000 jobs, amounting to more than $1.6 billion in wages, this year.

When the 25% tariff was imposed, say wine industry leaders, it immediately raised the price of wine for consumers, made some wines inaccessible and cut profits for other wine businesses.

Lyle Fass, president of Fass Selections, an importer offering European wines, said the 25% tariffs slashed his profits immediately by $40,000.

"Sales were the worst they've ever, ever been," said Fass. "It's improved a little since we're trying to adapt, but this cannot be permanent. Either we raise prices and make wine unaffordable, or we absorb the impact. It's not sustainable. And there are categories of wine we can't sell any more; they're over and done with."

Michael Wheeler, co-founder of PDX Wines, an importer-distributor in Portland, Ore., said having diverse wine offerings has saved his business.

"Our French portfolio especially has been hurt," said Wheeler. "We're digging into wine sources in Chile, Argentina and other places. We've been laying low, working hard."

California vineyard manager Haas said he is also concerned.

"The 100% tariffs will be reviewed again, so they're not off the table yet," said Haas. "And wine businesses are really feeling the pinch of 25% tariffs. I'm relieved, but I'd say it's not cause to celebrate yet."

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