The threat of 200 percent tariffs on European wine and Champagne imports by the US government has fuelled market instability and uncertainty. The consequences of tariffs are many, such as higher costs and fewer choices for consumers on both sides of the Atlantic as producers and distributors struggle to maintain supply chains and find new markets.
The threat of tariffs looms over vineyards on both sides of the Atlantic.
In March, the Trump Administration proposed a 200 percent tariff on imported wine and Champagne from Europe, intended as a retaliation against EU plans to impose a 50 percent tariff on American whiskey.
While tariffs have been imposed by the United States, currently 10%, tension between the trading partners is contributing to higher market instability. The constant threat of having various levels of tariffs imposed, retracted, delayed, increased or decreased is also creating uncertainty.
The US Administration aims to usher in a patriotic reset, fostering domestic wine production and reducing the prominence of foreign brands. However, fencing off the American market from European producers would be a blow, not a bolster, to the sector’s resilience, and not just for European wineries.
The knock-on effect of tariffs will exacerbate the most critical wine industry crisis: people are drinking less wine. The most recent OIV State of the Industry 2024 report notes a decrease of 3.3% of wine consumption globally, confirming a market contraction. Tariffs will also create distribution challenges – it will be harder for consumers to find their favourite brands and at reasonable prices.
Higher prices and fewer choices for consumers likely means that consumers will turn to other beverages, such as spirits, beer, or non-alcoholic drinks. As the NOLO (no- and low-alcohol) trend spreads among younger generations, the industry risks losing both current and potential consumers.
Smaller producers will be hardest hit as revenue dries up because they lack the financial reserves and extensive customer bases to wait out the current US Administration. Yet, even large producers will struggle to keep their wines below the prices consumers are willing to pay for them. Another critical issue in the wine industry is surplus. Despite the 2024 harvest being the smallest overall since 1961, there remains a surplus of wine worldwide, owing to a build-up of excess for several years. Producers must find ways to sell their wines and tariffs will make that even harder than it is now.
In hospitality and retail, businesses know that wine is not purchased in a vacuum. Importers, distributors, and restaurant wine directors rely on a diverse catalogue of bottles to stay afloat. Wine portfolios cover geographical regions, flavours, and price ranges. For example, a sharp spike in the cost of Champagne leaves the hospitality sector with three choices: shrug the price onto consumers, trim their wine lists, turn to domestic alternatives which may not offer the same level of quality or prestige. None of these options will be welcome.
The impact on Europe
High-end wine producers may be less affected if their market is primarily European. However, given that the US is the world’s largest wine consumer market and the least price-sensitive, even the most elite brands would likely face challenges.
France and Italy are the largest European wine exporters to the US, and a 200 percent tariff on their products would cause a slump in orders. The French Association of Wine and Spirits Exporters (FEVS) estimates sales could drop by 20 percent if the tariffs are imposed.
The fallout would push European producers to embark on a costly search for new markets. These costs will ultimately hit consumers’ wallets, though wine-drinkers in countries where people mostly purchase domestic wines, such as France, are less likely to be phased by a smaller number of options on supermarket shelves. Consumers in France may find rarer brands to be less expensive or more available.
Unpredictability will remain a significant challenge, with Italian wine exports to the US stalling in late March due to uncertainty over possible new duties. Speaking at a conference in Rome, Italian Agriculture Minister Francesco Lollobrigida said the government was concerned about “further burden that will create more difficult conditions”. With an export market that is largely driven by more accessible and highly visible wines, such as Prosecco and Pinot Grigio della Venezia, Italian producers have much to fear with tariffs as their price positioning will likely be less appealing to US consumers.
Implications for US producers
Sailing would be no smoother for producers and consumers in the US. Even though California is the fourth largest wine producer in the world, legislation makes it difficult to transport wine across state borders.
Difficulty reaching a large consumer market could worsen conditions for producers in states with an abundance of vineyards. An oversupply of grapes, called “grape glut”, has forced some growers in California to start ripping out vines. At the same time, natural disasters such as wildfires in recent years have damaged some producers’ inventories and tainted fruit.
Distribution networks may come under immense strain as restaurants and retailers digest the higher cost of imported wine. If distributors begin to fold under financial pressure, vital pipelines will start disappearing for US producers trying to get their products onto shelves and wine menus.
Of course, short-term scarcity may create more interest and stimulate sales from lesser known wine-producing states across the US to satisfy the country’s appetite for wine. However, this will not be a quick or easy process. Producers need to cultivate a large enough quantity of grapes, and new plantations require three years before they are able to start producing. During this time, consumer demand may start to decline, especially among young Americans who already trend towards drinking less wine.
As the demand for wine shrinks, tariffs would be an unnecessary blow to the wine industry on both sides of the Atlantic. The hit to producers’ pipelines, distributors’ supplies, and consumers’ pockets would not be a welcome one.
It is encouraging to see that the US and EU have so far held off on bringing extreme tariffs into effect. Hopefully, this opens a pathway for European and American products to continue competing healthily through excellence rather than tariffs.
About the Author
Nathalie Spielmann is a Full Professor of Marketing and Director of the MSc Wine & Gastronomy programme at NEOMA Business School in France. She is a widely published researcher in international peer-reviewed journals, and is regularly invited to share her expertise at professional wine and tourism events, including wine exhibitions, technical conferences, and seminars.
