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Tariffs on European wine could be good or bad for California wine producers, depending on whom you ask.

Some American winemakers, restaurateurs and others are urging President Donald Trump to exclude wine from tariffs on goods from Europe, saying European wines are important to the health of domestic wines.

But not all California wine producers are on board. They argue that European winemakers are already subsidized, so American companies having to bear tariffs on just about everything else — including imported corks, barrels and other supplies — puts wine producers in high-cost California at an even bigger disadvantage.

For some wine growers, “it’s certainly hard to hear” about other U.S. wine and hospitality industry players pushing for “zero-for-zero” tariffs on European wines, said Natalie Collins, president of the California Association of Winegrape Growers, which has 650 members. She said it’s tough for California winemakers to price their products to compete with those from Europe.

Trump recently said that he had reached a tariff agreement with the European Union, but some details have yet to be released, including possible exceptions. For now, the EU says the 15% tariffs that went into effect at the beginning of August apply to wine, though negotiations reportedly continue. The U.S. wine industry, which has been facing myriad challenges including new studies that say alcohol is bad for people’s health, falling demand and growing costs, is taking this opportunity to ask for help.

“We’ve seen two years in a row of declining wine consumption in the United States for the first time in two generations,” said Jason Haas, co-owner of Tablas Creek Vineyard in Paso Robles. “It shows up in less tourism, fewer people visiting wineries, fewer people ordering over e-commerce, less sales through wholesalers, both restaurant and retail,” Haas added.

That’s the ecosystem the U.S. Wine Trade Alliance and other industry groups are saying will feel the pain if European wine prices rise because of tariffs: thousands of wine importers and distributors, tens of thousands of wine retailers and hundreds of thousands of restaurants. California, the nation’s leader in wine-related tourism and exports, could be most affected. WineAmerica, an industry group, said California’s wine industry generated about $88 billion in economic impact in 2022. The state’s wine exports in 2022 totaled $1.3 billion, according to the California Department of Food and Agriculture.

Distributors Need Income From European and American Wines

Katie Lazar co-manages the 45-year-old Cain Vineyard & Winery in St. Helena in the Napa Valley.

“We’re a long-term business,” Lazar said during a recent media briefing, echoing what other winemakers said about how growing grapes and making wine takes years. “It takes (the wine industry) so long to react and be able to change that the chaos that is present now is an existential threat to the world that we live in.”

Winemakers like Lazar say the distributors they rely on to sell their wines need revenue from selling European wines as well. Their ability to distribute domestic wine is tied to how much other wine they have coming in, she said in an interview with CalMatters.

Most of the U.S. alcohol industry has a three-tier structure that dates back to the repeal of Prohibition. Winemakers and producers are the first tier, followed by distributors and retailers. All three are facing the uncertainty brought about by tariffs: Some wine imports are on hold, meaning less revenue for distributors and retailers.

“I’ve never felt so interconnected like I feel now, even with competitors,” said Matt Licklider, proprietor of LIOCO in Healdsburg, a winemaker that sources its grapes from various small vineyards in California. He said his winery sells to 40 distributors, some of which didn’t know whether they would have revenue coming in from imports because of the unknowns around tariffs. So some of those distributors are ordering less from him. “It has put distributors in a more conservative mindset, which doesn’t benefit anyone here,” Licklider said.

For restaurants that have very thin margins, marking up certain items such as wine can help them survive. Licklider said over the years, he has seen restaurant markups go from two to three times to as high as five times a wine bottle’s price.

Paul Einbund, owner of two restaurants in the Bay Area, said “a lot of my diners just won’t drink domestic (wine).” But he does list some American wines alongside European wines at The Morris, his restaurant in San Francisco, and Sirene, his new restaurant in Oakland.

Not knowing what’s going to happen next is the worst part, Einblund said, especially for small businesses that depend on trying to buy their products at the lowest possible prices.

“People up and down the supply chain are in trouble,” he said. “We were getting emails saying pre-tariff pricing, but that’s dried up now. European producers are not selling to Americans right now. European buyers are not buying American wines right now.”

European Wine Exports Are Heavily Subsidized

But Richard Samra, who has been growing grapes in the Sacramento Delta and Lodi for 40 years, said he is more worried about selling his grapes to domestic wineries. He said it’s “amazing” that some in the wine industry are asking for no tariffs on the competition.

He said that competition gets plenty of help. The European Commission recently approved $5.6 billion to support exports of French wines and spirits to the U.S. The European Union spends more than 1 billion euros a year to help boost European wine, and some countries have their own subsidy programs.

“U.S. wine grape growers don’t have that,” Samra said.

“We want to level the playing field. We have plenty of grapes and wine available for sale,” Samra added. He said tens of thousands of acres of vines have been pulled out in California as supply outstrips demand, and he expects that to keep growing. He said imports are a major factor: “Profit margins for people are greater when they purchase a product from outside the U.S. and sell it here.”

Yet, vintners like Haas, in Paso Robles, said he also worries about the relationships that he has cultivated for years and how they’re being affected by the tariffs. Tablas, his winery, has lost all business in Canada this year.

“There’s certainly spillover effects in terms of other countries just being less wanting to support American products, because they feel like they’re being bullied,” Haas said.

Tablas only exports about 5% of what it produces, but Haas wanted to grow that this year. “We did a lot of investment last year, and building up export markets,” he said. “And so to have it be down this year instead of up has certainly been a hit to us.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.