What the Trump Tariffs Mean for the US Fine Wine Market

The impact of tariffs

Yet the Trump Administration’s tariff-based economic policy, with its threat of tariffs, imposition of tariffs, temporary suspension of tariffs, and what seems to be a never-ending series of tariff deadlines, has worked against that goal of transparency. Talk to analysts and retailers and the Trump tariff policy has caused most of the commotion of the past 10 weeks.

“All of this is a ‘big if,’ “ says Robbie Stevens, Liv-ex’s head of broking. “The challenging thing here is that predictions have been reliably unreliable. You can look back at forecasts and they have changed with some disparity or even been completely different.”

Stevens says the Liv-ex downturn that started at the beginning of 2023 seemed to mirror the larger, overall wine market slump that started about the same time, as consumer demand for wine fell globally. In one respect, he says, the downturn wasn’t unusual, given the “cyclical nature” of the secondary market. In 2011, for example, Chinese politics around domestic belt-tightening, were at the centre of the last important downturn, while the market boomed during Covid before the 2023 decline.

And, in the first quarter of this year, there seemed to be the beginnings of a Liv-ex recovery – not full blown, says Stevens, but with enough good news in the numbers so that analysts thought the end might be in sight.

Until it wasn’t.

“On the one hand, you could look at this as a correction from the overheated market during the pandemic,” says Dave Parker, the CEO/owner of Benchmark Wine Group, one of the largest fine wine and secondary market retailers. “But the first few weeks around April were eye-opening.”

Buyers scaling back

The current tariff is only 10%, well below the threatened 200% or the initial 20%, which was suspended until the beginning of July to facilitate negotiations. But Warner says that’s of little consolation to his customers.

“Yes, they’re scaling back their purchases,” he says. “And yes, they’re aggravated. And, no, they don’t see this as the normal cost of doing business. They’re not even actually aware of what’s going on, thanks to the general disinformation campaign that the cost of the tariffs are paid by the exporting countries and not by the importers and retailers, as they actually are.”

One reason for fewer purchases, despite the lower tariff, says Parker, is that even a 10% hike on a $500 bottle of wine is big enough for consumers to notice. In addition, Benchmark research, based on the company’s extensive pricing information, has discovered what Parker calls the “5-50 rule.” For every 5% price change, up or down, its fine wine sales move in the opposite direction. So even the 10% tariff has the power to cut purchases significantly.

Further complicating matters, says Stevens, is that the fine wine secondary market doesn’t necessarily act the same way as the consumer wine market. For example, if wine prices fall, which has happened in both the consumer and secondary markets, the former will buy more wine — the law of supply and demand. But given that much of the secondary market revolves around wine for investment, that same correlation doesn’t always hold, which Stevens calls a fascinating contradiction. Wine investors don’t necessarily see lower prices as a reason to buy, but as a reason to avoid certain wines because they’ve lost value. Why buy something that doesn’t look like it’s going to appreciate in price any time soon?

So, until the beginning of July, many secondary market retailers and importers are guaranteeing prices to take into account the 10% tariff. They’re also flying imports into the US, cutting shipping time from months to days. That way, they’ll have a better handle on what the tariff will be when the wine arrives in the US, since the tariff is paid when the goods arrive in the importing country and not when they leave the exporting country.
 

Smaller players will miss out

Meanwhile, the largest importers and retailers, says Parker, were also able to stock up at pre-tariff levels, giving them an advantage over their smaller competitors, who didn’t have the financial resources to do so. This, he says, could lead to consolidation among secondary market companies later this year, given that many of the larger are looking for acquisitions among the smaller who may be struggling in the current downturn.

Finally, what happens if the US goes into recession, which – tariffs or no – would further cut secondary market sales? The latest US indicators say a recession is more likely than ever, given sagging retail sales; the investment bank J.P. Morgan said in mid-April that the odds were 60% in favor, and some sources have said it was close to 75 percent in the first week of May.

Which, ironically, might be good news for the secondary market as well as helping to resolve the tariff impasse without a hike to 20%. Several people interviewed for this story say that the Trump Administration finally seems to understand the relationship between its tariff regime and increased chances of a recession, and might let US trade negotiators work out a compromise with the EU before the July deadline. Parker, for one, says he is cautiously optimistic that will happen, and especially given the work the US Wine Trade Alliance trade group has done to point out that wine tariffs are paid by the importer or retailer.

Which would be the good news the secondary market hasn’t seen much of over the past couple of years.