When Trump tariffs hit French barrels and corks, California's winemakers feel the squeeze

The Guardian

2 days ago

Kory Burke, a small producer of high-quality wines in central California, never believed that tariffs on imports from France or Italy could help boost his business. But he knew for sure they would be a big hindrance as soon as Donald Trump announced late last month that he was slapping a 15% levy on all goods from the European Union.
'The first email I received was from my cork provider,' Burke recalled. 'He said he'd take on 2% of the additional cost of importing corks from Europe, but I would have to absorb the other 13%. Then my barrel supplier got in touch, pushing me to put in my orders as fast as possible because every new French barrel coming across the Atlantic after the tariffs was going to come with a $100 or $150 fee.'
Every one of these messages was a gut punch for Burke's five-year-old family-run business, Dresser Winery, which sits on an idyllic hillside outside Paso Robles and specializes in big, bold reds. Burke sent a note out to his wine club members earlier this year telling them he did not plan on increasing prices for the fall shipment, but he realized he could no longer honor the commitment.
'If we do that,' he said flatly, 'we have to shut the business down.'
It turns out even US wine producers are heavily reliant on foreign components – everything from French oak barrels, which give the wine a buttery, vanilla finish in contrast to the much less appealing brown sugar taste of American oak, to glass bottles and corks and the wine-making equipment itself.
'Every single product we use, from our pumps to the de-stemmer, comes with instructions written in six languages,' Burke explained. 'Could we produce some of these things here? Sure, but it would take three years to get production up and running, and that's not the way the specialization has been.'
As another producer from Paso Robles, Paul Hoover of Still Waters Vineyards, put it: 'The only thing in my bottles made in America is the wine.'
Ostensibly, Trump's tariffs on imported goods are supposed to give a competitive boost to American entrepreneurs like Burke and Hoover. But the theory does not really apply to the wine business – not only because so many of the materials used to make California wine come from overseas, but also because people do not buy wine based on price alone.
'It is a fundamental misunderstanding of wine drinkers and the wine marketplace,' the National Association of Wine Retailers, an industry lobby group, said in a blistering statement in response to the 15% tariff announcement.
'Champagne is not sparkling wine. Bordeaux is not simply cabernet sauvignon or merlot … America's independent fine wine retailers understand better than most that when an American wine drinker asks for red Burgundy, they do not substitute Oregon pinot noir when the Burgundy is out of their price range or unavailable. They simply don't make a purchase.'
Burke echoed this sentiment, saying he had to control his reaction recently when a Trump supporter came to his winery and told him he must be excited about the business opportunities the tariffs will create. 'People aren't buying my bottles because of tariffs on French wines, that's for sure,' he said. 'If anything, I'm competing against other Californian and American wines. With European wines, it's not a real competition at all. They're very different regions, very different products.'
California wines are far from the cheapest because of the high cost of land and labour in the Golden state. For that reason, many producers live or die by the quality of what they make and the sort of subtle distinctions that come from varietals grown in a particular microclimate, or in a particular soil, or aged in a particular barrel.
Price still matters, because fine wines are a discretionary spending item, and if the economy or people's personal finances are struggling it is often one of the first things that consumers stop buying. The National Association of Wine Retailers, said it was worried about tariffs generally, not just on wine, because inflation and an uncertain business climate would hurt its members' bottom line just as much.
'The increased costs of living that will result from the recently enacted tariffs, along with the significant increase in prices for wines … will only push down consumption further, thereby harming the American wine industry to a degree from which many of its participants will not recover,' the group said.
In Paso Robles, which has seen an explosion in the number of wineries over the past two decades to about 250 and has become a major weekend tourist hub for wine lovers from San Francisco and Los Angeles, some of the harmful effects are being felt already.
Joel Peterson, executive director of the Paso Robles Wine Country Alliance, said international orders were drying up as the reverberations from Trump's trade war echo around the globe. 'We have wine sitting in a warehouse that is specially labeled for the Canadian market that producers can't sell,' he said. 'We've had no orders from the UK since Trump's so-called Liberation Day in April. People are scared to order those wines.'
Domestic retailers say they have not seen significant price increases kick in yet – for either domestic or European wines – but are already starting to struggle simply because of the uncertainty created by the White House's constantly shifting messages on where and at what rate it intends to impose tariffs.
'We're not in a recession but it's what I call a recess market,' said Jim Knight, co-owner of the Wine House in Los Angeles, which specializes in small-label boutique wines from the United States and around the world. 'People have money, they're just not spending it … If the president made a decision and stuck with it, we could plan for it. But we haven't been able to plan for it.'
Knight's business has a particular problem with high-end French wines it bought in advance years ago – right after the grapes were harvested – and presold to customers with an anticipated 10% mark-up. When tariffs on European wines were briefly at 10% earlier this year, Knight was looking at his entire profit being wiped out, since tariffs are imposed when goods arrive in the United States, not when they are purchased. Now, at 15%, he's looking at taking a loss that might force him to lay off workers or otherwise shrink his business.
For now, he is letting the wine sit in a temperature-controlled storage unit in France and hoping Trump might still bend to pressure from the industry to create a tariff exception for wines and spirits. An industry initiative called Toasts not Tariffs has been lobbying the White House hard to do exactly that.
More broadly, Knight said he was worried that small European producers would no longer offer their limited production to the US market, and that some of the specialist importers, the ones who love the same smaller label wines he does, will go out of business. 'Importers of wine from the European Union are American businesses too,' he remarked.
That helps explain why a US distributor of European wines and spirits, VOS Selections of New York, has been the lead plaintiff in a lawsuit challenging the constitutionality of Trump's tariffs – a case that led to an initial ruling against the administration in the court of international trade at the end of May.
Ilya Somin, a law professor at George Mason University who has spearheaded the suit, said the nature of the wine business was a vivid illustration of the harm that tariffs can do. 'Many of the wines our client imports simply cannot be produced in the United States because of differences in climate, soil and other factors,' he said. 'We're not benefiting American industry, we're damaging it and hurting consumers.'
Not every wine producer sees the economic outlook as uniformly gloomy. Hoover, of Still Waters Vineyards, said the cost of storing and transporting wine was a greater burden than the price of corks or bottles – particularly for California producers who have too much inventory on their hands following a post-Covid boom-and-bust cycle. He said he was relieved at a drop in fuel prices in recent months and saw opportunities if they fell further.
He was modestly hopeful, for example, that he could tap into sales opportunities on the east coast where he was previously priced out. 'Before the tariffs, a boat coming from Europe could deliver wine to the east coast more efficiently than I could getting it across the United States on a truck,' he said. 'Let's see how that looks going forward. Energy costs are the key to this. Let's hope the tariffs don't monkey that up.'
One of the main reasons that people in the wine business do not believe the tariffs will benefit domestic producers, as the White House is promising, is that they have seen this scenario play out before, during Trump's first term as president.
In 2019, the administration imposed a 25% tariff on most European wines, among other products, in retaliation for European subsidies on Airbus passenger jets. Trump said at the time that the relatively low price of French wines was unfair to California producers, but no evidence emerged that the tariff did anything to redress that perceived unfairness. 'It did not increase my domestic wine sales at all,' Knight said.