The effects of President-elect Trump’s proposed tariffs hinge on the same question that looms over his every policy proposal: Will he actually do it?
The rates Trump has tossed about on imports — as high as 100 percent on goods from China and 25 percent on goods from the U.S.’s two largest trading partners, Mexico and Canada — are historically unheard of. There’s even a question of whether he has the unilateral legal authority to impose such high tariffs. Combined with a lack of clear details from the incoming administration, such questions have the alcohol industry on edge as it heads into its critical holiday sales period.
Tim Buzinski feels the anxiety. He’s the co-owner of Artisan Wine Shop in Beacon, N.Y., and is uneasy about the unknowns in Trump’s tariff proposals. He’s considering adding a few extra cases of European wines to his orders before the end of the year, just to hedge against potential price increases in the future. Still, he worries these tariffs will cause prolonged pain for the wine industry.
“We are talking about a long-term war that we’re essentially establishing. That’s a very different feel than the last tariffs,” Buzinski says.
“It will affect thousands if not millions of jobs. …We’re talking about economic doomsday.”
He’s referring to the precedent Trump set by imposing tariffs on various European imports in 2019 — e.g., French wine and Scottish whisky — as the result of a dispute over airplane subsidies. These led to retaliatory tariffs from the European Union on some types of American alcohol; for example, they reduced U.S. whiskey exports to Europe, their largest export market, by 20 percent. (Under the Biden administration, tariffs on goods from the EU were suspended in 2021.) Economists who analyze the alcohol industry say those tariffs were, on the whole, harmful to U.S. producers, importers, and consumers. A more aggressive, less targeted tariff scheme under a second Trump administration could prove even more damaging. Certain categories of alcohol would fare slightly better than others, but almost none would be spared under a blanket tariff scenario.
“In the past, everyone has had the sense to be very targeted with tariffs and very moderate. This bull-in-a-china-shop idea is going to, if it happens, be really destructive,” says Michael Uhrich, founder and chief economist for Seventh Point Analytic Consulting and former chief economist for the Beer Institute. While the alcohol industry would certainly suffer, the broader fallout of across-the-board tariffs would be massive. “It will affect thousands if not millions of jobs. …We’re talking about economic doomsday,” Uhrich says.
Compared to five years ago when Trump’s first tariffs took effect, the U.S. alcohol industry is in a more precarious state. Analysts at IWSR predict sluggish growth in the coming years, following a “reset year” in 2023 that saw total alcohol volumes decline 3 percent in the U.S. Higher grocery prices spurred by trade wars and proposed deportations would further squeeze Americans’ budgets and likely decrease alcohol spending. Many in the industry say the timing is disastrous.
“A new round of tariffs targeting the alcohol industry is the worst thing that could happen to us right now, especially as we’re still recovering from Covid-related slowdowns and dealing with global inflation,” says Cara Patricia, co-founder and CEO of Decant Bottle Shop & Bar in San Francisco and Napa, Calif. “These tariffs will raise prices at every step: from the importer to the distributor, from the distributor to the retailer and restaurants, and ultimately to the consumer.”
This is the sad irony of Trump’s tariffs: They’re unlikely to accomplish his stated aims of punishing foreign companies and favoring domestic ones — and they’ll hurt U.S. drinkers in the process.
“With a tariff, who actually pays for it? Is it the guys in China, or is it us? It looks a lot like it is us.”
Let’s start by analyzing the first half of that goal. Do tariffs disadvantage foreign producers of beer, wine, and spirits? Not exactly. Nonprofit think tank Tax Foundation found that its U.S. consumers and companies that bear the burden of higher tariffs. Using wine as an example, new research from economist and Journal of Wine Economics editor Karl Storchmann shows that many European producers whose wines were subject to tariffs under Trump’s first administration were able to evade the tax. Many simply raised the stated alcohol content on their bottles above 14 percent ABV, the threshold below which wines were taxed. The share of French wine over 14 percent imported to the U.S. increased from about 5 percent before Trump’s tariffs to about 40 percent in the year after they were implemented. U.S. regulations allow for some wiggle room in stated versus actual alcohol content, and it appears European wines were able to use this to avoid paying tariffs.
“They dodged it, and they maybe dodged it legally,” Storchmann says.
His analysis also indicated that wholesale wine prices in New York State generally rose as a result of those tariffs, even those from countries not subject to such taxes, which adds to the inflationary pressure. Why? Because if prices for French or Spanish wines increase, that gives permission for wine prices from, say, the U.S., Argentina, and Australia to creep up slightly as well. Uhrich says this is likely to happen with beer, too: If imported beer prices increase as a result of tariffs, U.S. brands would almost certainly raise prices.
“With a tariff, who actually pays for it? Is it the guys in China, or is it us? It looks a lot like it is us,” Storchmann says.
If U.S. shoppers are paying higher prices for imported alcohol, does this at least favor domestic producers? Again, it’s not clear that it does. The global supply chain means that U.S. companies are heavily reliant on imported materials. For the beverage industry, aluminum is the most significant. Canada exports 75 percent of its aluminum production to the U.S., and domestic production here simply can’t replace that volume. It would take years, Uhrich says, to even begin construction on new aluminum plants, let alone to supply what U.S. alcohol companies need. Beer is obviously the most vulnerable to rising aluminum costs: Two-thirds of U.S. beer is packaged in cans. There’s simply no way, Uhrich says, that further tariffs wouldn’t drive up the cost of domestic beer as a result of costlier materials.
“Tariffs are universally bad for everyone in that they cause everyone’s costs to increase. They really only hurt the American consumer.”
Obviously, beer would be burdened by rising aluminum prices more so than wine or spirits, which package less of their products in cans. But overall, beer might have a slight advantage in the trade wars, because as a category, it is less dependent on imports than wine or spirits. (Roughly half of all U.S. alcohol imports are spirits, according to 2023 data from the U.S. Department of Agriculture.) Yet Uhrich cautions that focusing on variations in how categories are harmed by tariffs loses sight of the most important fact: Impediments to free trade harm all industries, and harm consumers.
“Tariffs are universally bad for everyone in that they cause everyone’s costs to increase. They really only hurt the American consumer,” Uhrich says. “The number and magnitude of the wild cards in [Trump’s trade proposals] are terrifying. Every industry is very concerned. They’re all gearing up for a lot of trouble.”
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