For months the word “tariffs” has monopolized the discourse of wine world insiders. The most schizophrenic assumptions have not allowed for serious analysis of what is really happening in the wine world outside of the duties to the U.S.
Of course, the 15 percent duties that the Italian wine industry will face in order to export to the U.S. are quite a problem. They affect a turnover of almost 2 billion euros, which represents almost a quarter of the entire export, which is just over 8 billion, and an important percentage of the entire sector, which comes to 15 billion more or less. However, if you could “freeze” that 15 percent by preventing importers, distributors and end merchants from then charging it back in the three steps that often exist in many of the U.S. states, the problem would be easier to deal with. That would leave 15% of the ex-cellar price to the end customer.
U.S. business insiders, in this case the Toasts Not Tariffs Coalition, which represents more than 50 U.S. associations involved in the wine & spirits business, sent a letter to President Trump demanding that the United States and the European Union reach an agreement to “ensure fair and reciprocal trade for spirits and wine.” The final sentence is significant: “Mr. President, we need toasts, not tariffs, as we head into the most important season for our industry. As part of your America First Trade Policy, we seek your leadership to secure fair and reciprocal tariff-free trade for U.S. and EU spirits and wines as soon as possible.” (“Mr. President, we need toast, not tariffs, as we approach the most important season for our industry. As part of your America First trade policy, we ask for your leadership to ensure fair and reciprocal duty-free trade for U.S. and EU spirits and wines as soon as possible.”).
While waiting to see what will happen, negotiations could be set up with the different players in the U.S. market, just in case. Then, situations involving other exporting countries outside the EU should be analyzed. Argentina and Australia, for example, have duties at 10 percent for now. so the competitiveness of our wines “pays” only a 5 percent surcharge. A lot? Little? Certainly not good, but the bad seems contained.
General disaffection with wine consumption
What is even more worrisome lies in the general disaffection with wine consumption, in the presence of production that, at least here, is not dropping by much. To speculate that this will lead to a collapse in prices is not entirely peregrine. Resulting in a drop in land and building values, which would be quite a mess.
Perhaps it would be a good idea for those in charge to start asking themselves how to deal with such situations. Contain grape yields? Flatten? Distill? All hypotheses to be analyzed, and quickly too. In France they have taken steps in this direction; we are still in the preliminaries.
In order to win back consumers, then, in addition to avoiding courtly and congealed communication, an analysis of prices and mark-ups operated by Horeca and large-scale retail chains must be made. Prices already on the label like for books? This is also a hypothesis, of course. Let’s keep in mind that with the inflation of the past years, purchasing power in Italy has dropped significantly for the middle classes. Those who could afford a fairly expensive 20- or 30-euro bottle now and then can no longer do so.
If we put all this together, we see that there are many issues on the table, and I don’t see any magic wands around. Is this the end of a cycle? Maybe so, although I hope not. The situation is really complicated, though.
