This week, the Trump administration announced that it is considering raising tariffs on European wine imports to the United States to 100%. This proposal, made by the Office of the United States Trade Representative (USTR), is in retaliation against something that has nothing to do with wine : the aviation industry.
Back in October 2019, the U.S. slapped a 25% tariff on European wine, cheese, olives, and other culturally significant products, after the World Trade Organization declared that the EU had given improper subsidies to the aircraft manufacturer Airbus, a rival to the Chicago-based Boeing Co. Now, the US could increase tariffs on European wine to 100% by mid-August, due to a lack of progress in negotiating settlement terms with the EU and eliminating subsidies for Airbus SE.
If this were to happen, the wine industry is bracing for a harsh loss of revenue after an already difficult year in the face of Covid-19. Restaurants and bars, in particular, could feel the worst effects of this proposed tariff increase. Patrick Panella, who owns and operates three restaurants in Charleston, South Carolina with menus full of European products, says these tariffs could be devastating. “I’m starting to see some dramatic increases at a time I can’t handle that,” Mr. Panella said. “Year-to-date, my profit is down 95%. I’m not getting paid. Gross revenue is down 50%. We’re operating at half capacity in all the restaurants.”
So, what does this mean as a wine investor? The short answer is that wines could cost more if this legislation passes – meaning that now is the time to purchase investment shares before these spikes happen. If it appears in the months leading up to August that this tariff legislation will pass, the demand for wines could increase as U.S. importers rush to make big wine purchases before the tariffs go into effect. As the demand spikes on an already-limited supply of fine wines, this could increase the value of your wine investment securities. Plus, one bonus of investing with Vinito Capital Management is that we hold your wines in a climate controlled warehouse in the Geneva Freeport – meaning you could be exempt from high bottle prices driven by tariff increases since your wines will be stored in Europe, not the U.S.
If you play your cards right, the proposed 100% tariffs on European wine imports to the U.S. could play in your favor.
If you have any questions or want to learn more about our wine investment portfolios, get in touch! We’d be happy to help.