While wine producers across the world wait to hear what tariff Donald Trump will finally choose to apply to their particular country (before quite possibly changing his mind and raising or cutting it depending on his mood), it is worth considering the impact tariffs have on the final price to the consumer.
Thanks to the peculiar three-tier system that has applied in the US since the repeal of Prohibition, almost every bottle of wine that’s consumed at home has to pass through the hands of an importer, a distributor and a retailer on its way from the overseas producer to the man or woman who is paying for it at the checkout. (There are a few instances of companies that, for historic reasons, hold more than one of these licences, but these are rare exceptions to the rule.)
Each of the players has, quite reasonably, to make a decent return on their effort, which explains why a bottle of wine that arrives in a US port costing $10 tends to end up at nearly $25 on the shelf.
If a basic 10% tariff is applied - as seems almost certain - and assuming everybody maintains their margin, that will rise to around $27.
If, however - as also seems likely for at least some countries - the tariff is 20%. the final price tag will be a shade under $29.40. Not far off five dollars more than the same customer would have paid for the same bottle before this current situation began.
The ideal way to reduce his or her pain most fairly would be to split the extra cost equally between the producer and the players in the US. In some cases, this is already happening, but in others, there is a lot of reluctance on the west coast of the Atlantic.
Many importers are asking the producer to make the entire sacrifice. Which, in real terms would mean cutting the landed price to $9.10 or $8.60, depending on the level of tariff.
Obviously, these figures are all approximate and do not specifically cover taxes, transport and warehousing. And, of course, margins vary. Even so, this chart offers a pretty fair indication of what selling wine to the US, a market with declining consumption, may look like. They also fail to take account of the fall of around 6% in the value of the dollar since April 2024, which is already having to be covered.
If the US currency doesn't recover – and there is no certainty that it will do so – and if prices were agreed in dollars, negotiations between producers and importers are going to get even tougher.
This helps to explain why, on the one hand, US traders might decide to drop some of the imported wines they have been listing and, on the other, overseas producers may shift their focus away from the United States. RJ
I am grateful to Ben Justman of Peony Lane Vineyards for drawing attention - via a Linkedin post - to the margins taken by the US trade. His figures matched the ones I use as a rule of thumb.
