The Trump Administration Punts 100% Tariffs On European Goods To 2021

Posted: Jan 28, 2020

Collectors can heave a sigh of relief—for now.

The news, as it trickled out last week, was by turns promising, confusing and in the end, maddeningly inconclusive. The wine industry and collectors held their breath over anticipated word about whether the Trump administration would, in fact, impose the punishing 100 percent tariff it had dangled over all European wines (along with other goods like cheese and luxury handbags). Would the price of a bottle of Domaine de la Romanée-Conti La Tâche jump from $4,500, say, to $9,000?

The turn of events had all the trappings of international intrigue and elite watering-hole negotiations. French President Emmanuel Macron, last Monday, tweeted that he and President Trump had spoken, and he was confident there would be no imminent tariff escalation. Trump confirmed the productive conversation (by tweet)—“excellent,” he called it. Macron further indicated that the tariffs had been put on hold through the rest of this year, to give negotiations time. But, of course, Macron could only speak for France; the White House wasn’t commenting. So hopes were pinned on conversations between French Finance Minister Bruno Le Maire and our own Treasury Secretary Steve Mnuchin, both of whom, conveniently, were in Davos, Switzerland, attending this year’s World Economic Forum.

At issue behind the 100 percent tariff threat is an EU plan to tax digital revenues in the countries where they’re generated, rather than where companies have their European headquarters (which is often in low-tax countries like Ireland). That, argues our administration, would unfairly hit our large tech corporations—Google, Facebook, Apple, Amazon.

Threatening a tariff on European wine might sound like holding the wrong hostage, but it’s not without precedent. Old World wine lovers know that this salvo is merely an extension of a 25 percent tariff already levied last fall, over an equally unrelated trade issue: Europe’s subsidies for its plane manufacturer Airbus, which the World Trade Organization has deemed an unfair advantage over US companies like Boeing. That tariff, though, was selective. Only wines under 14 percent alcohol would be taxed; sparkling wine was excluded; and Spain was exempt. This time around, if the administration locks in 100 percent, the scope of goods affected is brutal—there’s no alcohol-level cutoff, sparkling wine is swept in, Spain doesn’t escape.

If you haven’t noticed any effect yet from last fall’s tariffs on the price of EU imports, it’s likely because, so far, the 25 percent margin has largely been absorbed by entities in the supply chain who don’t want to raise wine prices in the US market—EU wine producers, US importers, wholesalers, distributors, and retailers. Rocco Lombardo, president of Wilson Daniels, a prominent wine marketing and sales company whose portfolio includes many prestigious European wines, explains: “Working with our European wine partners, we’ve been able to mitigate the tariffs.” But, he adds, “I don’t know how sustainable that is. In 6 to 12 months, we’ll have to revisit the situation.”

By Sara L. Schneider
January 27, 2020

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