Confusion reigns supreme over proposed 100% wine tariffs

Posted Feb 01, 2020

The United States Trade Representative is considering a tariff of up to 100% on a wide variety of European wines. (Photo by Joshua Chang)Joshua Chang

By Michael Alberty | For The Oregonian/OregonLive

A recent tweet by French President Emmanuel Macron cooled one potential trade conflict with the United States, while muddying the waters of another. The confusing fallout has everyone in the wine world scrambling to make sense of it all.

On Jan. 20, Macron tweeted the following: “Great discussion with @realDonaldTrump on digital tax. We will work together on a good agreement to avoid tariff escalation.”

The French government was about to collect a new 3% tax on revenues earned in France by tech giants like Amazon and Google. The U.S. responded with a threat to impose a 100% tariff on a long list luxury goods that included Champagne.

Macron’s tweet signaled France’s decision to delay collection, and the U.S. temporarily shelved its threatened tariff. Both sides are currently negotiating the matter at an international forum hosted by the Organization for Economic Co-operation and Development in Paris.

Meanwhile, because of the 14-year dispute between the European Union and the U.S. over subsidies to aerospace giant Airbus, another potential 100% tariff still threatens a wider variety of European wines, including, once again, Champagne. That’s where the confusion begins.

France's President Emmanuel Macron, right, and U.S. President Donald Trump shake hands during a joint-press conference in Biarritz on Aug. 26, 2019. (Ludovic Marin/AFP/Getty Images/TNS) TNSTNS

The World Trade Organization ruled in October 2019 that E.U. subsidies to Airbus give the airplane manufacturer an unfair advantage over its American competitor Boeing. The W.T.O. awarded the U.S. the right to impose tariffs on $7.5 billion worth of European goods in response.

The U.S. set its initial Oct. 18 tariff at 10% on large civil aircraft, and 25% on an extensive list of other European products. Non-sparkling wines from France, Germany, Spain and the United Kingdom in containers less than 2-liters that do not exceed 14% alcohol by volume fell under the 25% tariff.

A W.T.O. panel rejected the E.U.’s appeal in December. United States Trade Representative Robert Lighthizer claimed the E.U.’s failure to end illegal subsidies to Airbus merited stronger action. A statement from Lighthizer read: “In light of today’s report and the lack of progress in efforts to resolve this dispute, the United States is initiating a process to assess increasing the tariff rates and subjecting additional E.U. products to the tariffs.”

A tariff of up to 100% on a significantly longer list of E.U. wines is one of the options available to Lighthizer.

Harmon Skurnik, president of Skurnik Wines, an importer/distributor based in New York City, remembers the day Macron’s tweet arrived. “With one Macron-Trump handshake on the digital tax, there were suddenly 20-30 articles with headlines like ‘Tariff Battles Are Over.’ It was horrible misinformation because the threat of tariffs related to Airbus still exists,” Skurnick said in a telephone conversation.

Confusion over tariffs spread quickly. Scott Frank is an Oregon winemaker who also owns Delicious Wines, a Portland-based distribution company that sells mostly European wines.

“I can’t tell you how many people called me saying ‘we won.’ I had to keep telling them the only wine covered by that proposed tariff was Champagne and that ‘we haven’t won anything yet,’” Frank says.

Daniel Posner, the owner of Grapes the Wine Company in White Plains, New York, lays out the possible scenarios for the next round of Airbus-related tariffs.

“The U.S. can announce new tariffs at any time, beginning Feb. 17,” Posner said in an email.

Posner explained the current 25% tariff on wines could be increased, decreased or held at its current level. Products, like wine, could be removed from the tariff list for six months at a time. Or, Posner says, “Previously carved out items like Italian and sparkling wines or spirits like Cognac and blended scotches can be added for six months. Tariffs can be revised every six months after Feb. 17, with the same five choices.”

What does Posner think might happen?

"A 25% tariff applied to E.U. wines across-the-board is not unlikely,” Posner says. “However, it would appear that, as far as the Feb. 17 date goes, things may not change at all from where we are today. Italian wines could see the same retaliatory tariff threat as French Champagne in the next few months (100%), given the fact that Italy has recently implemented the same DIGITAX that France has recently rescinded."

While the tariff threat remains, Scott Frank believes some members of the Oregon wine community “took their foot off the gas” after hearing about the Macron-Trump digital tax agreement. Jana McKamey, the executive director of the Oregon Winegrowers Association, says, “That might be the case. I have received significantly fewer messages about tariffs in the past week.”

The confusion is vexing for those fighting tariffs.

“Confusion is widespread. Producers in Europe think there is a truce. Those here think the same. It is awful,” Posner says.

-- Michael Alberty writes about wine for The Oregonian/OregonLive. He can be reached at malberty0@gmail.com. To read more of his coverage, go to oregonlive.com/wine.

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