U.S. Trade Representative Robert Lighthizer had no good news for wine consumers last night. The 25 percent tariffs his office (USTR) imposed on most French, German, Spanish and U.K. wines nearly ten months ago will remain in place for the foreseeable future, forcing wine lovers to pay more and inflicting economic distress on importers, retailers and restaurateurs just as the hospitality industry grapples with the economic downturn triggered by COVID-19.
“If the administration is serious about helping American businesses recover from the pandemic, they will end the absolute lunacy of these job-killing tariffs,” Ben Aneff, managing partner of Tribeca Wine Merchants and current president of the U.S. Wine Trade Alliance, told Wine Spectator. “The tariffs have utterly failed to move the E.U., and do nothing but hurt hard-working Americans.”
Wine, as well as Irish and Scotch whisky as well as other Europeans foods, continues to be collateral damage in a fight over subsidies to plane manufacturers. The trade war fight stems from a two-decade dispute between the U.S. and the E.U. over subsidized loans from Spain, France, Germany and the U.K. to Airbus. (The E.U. counters that the U.S. and Washington state have given unfair benefits to Boeing.)
On Oct. 2, 2019, the World Trade Organization (WTO) gave the U.S. the green light to impose duties on $7.5 billion worth of European goods. The following day, the Trump administration announced 25 percent tariffs on a wide range of European products. Table wines with less than 14 percent alcohol from the four nations that gave subsidies were also slapped with 25 percent tariffs.
Yesterday’s decision was the second mandatory review of the tariffs. In February, the USTR opted to increase tariffs on European plane parts from 10 percent to 15 percent, but left the other tariffs unchanged. This time, there were almost no changes. Well, almost. “Sweet biscuits” from the U.K. were removed from the tariff list; strawberry jam from France and Germany were added.
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To the USTR, the fight is all about planes. “The E.U. and member states have not taken the actions necessary to come into compliance with WTO decisions,” Lighthizer said in a statement. “The United States, however, is committed to obtaining a long-term resolution to this dispute. Accordingly, the United States will begin a new process with the E.U. in an effort to reach an agreement that will remedy the conduct that harmed the U.S. aviation industry and workers and will ensure a level playing field for U.S. companies.”
The administration has walked away from negotiations with the E.U. three times already. Last month, Airbus announced it would increase loan repayments to France and Spain in hopes of satisfying U.S. complaints. But sources in the administration say the USTR is looking for financial restitution. Complicating matters, the E.U. is expected to impose tariffs on U.S. products next month in retaliation for tax breaks given in the past to Boeing.
“Airbus profoundly regrets that, despite Europe’s recent actions to achieve full compliance, USTR has decided to maintain tariffs on Airbus aircraft—especially at a time when aviation and other sectors are going through an unprecedented crisis,” Airbus spokesman Clay McConnell said in a statement.
While the battle rages, European wine exports to the U.S. have fallen dramatically. According to the U.S. International Trade Commission, imports of French wine from January to June were down more than 50 percent compared to the same period last year. Spanish wine imports were down 60 percent.
But the tariffs also mean economic pain for American importers and retailers, at a time when the pandemic has made business hard enough. “These tariffs have done, and will continue to do, significantly more damage to U.S. small businesses than their targets overseas,” said Aneff. In the end, American consumers pay the increased cost of the wines. “With its recent decision, the USTR ignored a huge outpouring of public concern. Businesses and consumers overwhelmed USTR's public comments portal with over 27,000 submissions, the vast majority asking that the tariffs be removed.”
A recent study by the Wine and Spirits Wholesalers of America found that the duties could result in 93,000 job losses, $3.8 billion in lost wages, and ultimately an $11 billion hit to the U.S. economy this year.
The tariffs will be up for review again in February, if the U.S. and the E.U. cannot negotiate a solution by then.