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00:00This is a story about bottled poetry.
00:03That's what Robert Louis Stevenson called wine.
00:06And it's something that many of us enjoy regularly,
00:09but also something that may be a good deal harder to get a hold of
00:13if President Trump follows through with the tariff threats he's made against the European Union.
00:19We've been taken advantage of for many, many years by countries,
00:23both friend and foe, and frankly, the friends have been worse than the foes in many cases.
00:28A new deadline and a new threat.
00:31The U.S. could impose a 30% tariff on imported wine from the European Union
00:36if no deal is struck by August 1st.
00:39We have worked and now are ready to respond with countermeasures.
00:43It's been a mess.
00:46In New York, importer Victor Schwartz has spent nearly 40 years
00:50supplying restaurants and wine shops with hand-picked bottles from small European vineyards.
00:55Now tariffs threaten to upend the business.
00:58It's 20%, then it's 10%, then they threaten 50%.
01:01How different is the effect on your business of a 20 versus a 10?
01:05I mean, in our industry, end of the day, we might make 5% as a net profit, 5 to 10%.
01:13So obviously, we can't afford 10%.
01:16We can't afford 20%.
01:17But 20% is really egregious.
01:2020%, I mean, think about what that does.
01:25God, you know, it makes a $20 wine, you know, $25 basically,
01:30because, you know, there's kind of a multiplier effect as it goes through the system.
01:33You know, it's a much bigger impact.
01:35And don't forget, when we raise a price,
01:38it's not as if the consumer just accepts it.
01:43Where do American customers for wine go if they decide the price is too high?
01:48I'm not going to buy that.
01:49Where are you going to find Champagne?
01:51Where are you going to find Chateauneuf-du-Pape?
01:53Where are you going to find Chianti?
01:55You're not going to find it in Oregon or California.
01:57A Finger Lakes wine, let's just be clear, is nothing like a Napa Valley wine.
02:02Nothing like a wine from southern Italy or northern Italy or the center of Spain, etc.
02:09My gist is, is that these products are so connected to their place.
02:16And that's what's wonderful and interesting about wine.
02:18Otherwise, there'd be the wine company of the world,
02:21and it would come out of a spigot.
02:24Red, white, rosé, and sparkling.
02:27Done, right?
02:28But that's not why we love wine.
02:29And Americans do love their wine.
02:33In 2023, we consumed just under 900 million gallons of it,
02:38more than any other country in the world,
02:41with a value of over $107 billion.
02:44More than a third of that is shipped in from abroad,
02:48making tariffs a real issue for importers.
02:51But those in the business say it's not just the imports that will be hit.
02:55It's the entire wine ecosystem.
02:57Ben Anif is president of the U.S. Wine Trade Alliance.
03:03He has a shop in Tribeca that sells fine wine,
03:06which typically goes for over $20 per bottle.
03:11Distributors and importers,
03:13even those, by the way, that represent U.S. domestic wines,
03:17about 75% of their revenue comes from imported wine.
03:20So that's one of the really interesting things about this.
03:24On the tariff front,
03:25all of the major domestic wine producing organizations,
03:29from Wine Institute to Napa Valley Vintners to Wine America,
03:32they're all against tariffs on imported wine
03:35because they understand their domestic growers,
03:39their producers,
03:41rely on healthy wine distributors for access to market.
03:44Put another way,
03:46because state laws prevent domestic vineyards
03:49from supplying restaurants and wine shops,
03:51they need distributors.
03:53And the distributors rely critically
03:55on selling imports alongside their domestic wines.
03:59That's why those who import fine wines,
04:02like Victor Schwartz,
04:03and those who sell it to us,
04:05like Ben Anif,
04:06have no doubt that tariffs will cripple their business
04:09selling both foreign and domestic wines.
04:11But there's another part of the business,
04:14the value wine business,
04:16where a bottle or its equivalent
04:17typically costs less than $11.
04:21And producers for this segment,
04:23like Stuart Spencer in California's Central Valley,
04:26say they need protection from multinational companies
04:29bringing in cheap, subsidized imports
04:31that force American growers out of business.
04:35There is a lot of what we call bulk wine
04:38coming in these big 20-foot bladder containers.
04:41And it is this bulk wine
04:42that is really undercut in California grape growers.
04:45There is a lot of talk
04:47about the difference between free trade and fair trade.
04:50From your experience as a grower,
04:53but also from your dealing with Lodi,
04:55are there unfairnesses
04:57in some of the exports to the United States?
04:59I mean, it's a completely unfair market.
05:02I mean, we are competing in a global marketplace.
05:04The European Union spends over 2 billion a year
05:07between EU money and member state money
05:10propping up their wine sector.
05:13They are not only paying growers and vintners
05:16to distill excess wine and buy it up,
05:18but they're also paying them to plant new vineyards.
05:21And they spend hundreds of millions of dollars
05:22in market promotion all around the world,
05:24and the U.S. is the number one target market.
05:27They also have trade barriers,
05:28so it gets really complex when you get in the weeds,
05:31but we are not playing on a level field.
05:34Last year, California wineries,
05:36which make nearly 90% of U.S. wine,
05:39were stuck with more than 500,000 excess tons of grapes.
05:43Now, 77 million gallons of wine
05:46are sitting in storage tanks.
05:48And you can still see some of the grapes on the vines.
05:50We have thousands of acres of grapes
05:53that are being torn out right now.
05:55And we have small farms and family businesses
05:58that are up for sale
05:59because there's just not a prospect
06:01for them moving forward.
06:03My family's been in this for 50 years,
06:04and I talk to old-timers
06:05that have been in it for multi-generations,
06:07and they've never seen it as challenging as we are now.
06:1070% of all wine sales in this country
06:12is controlled by about a handful,
06:15five to six large multinational companies.
06:17They're bringing wine in bulk.
06:19They're blending it in with California wine,
06:22up to 25% in calling it American Appalachian.
06:25It's a federal loophole.
06:27We have millions of gallons filled up in tanks
06:31right now in California that don't have a home.
06:33But simultaneously, 24 million gallons of bulk wine
06:36is poured into California,
06:37coming in at super low prices
06:39and undercutting the California grape grower.
06:41Are you in favor of the tariffs
06:43that President Trump is talking about?
06:45Well, I think if I was to speak
06:47to our 700 grape growers that I represent,
06:50I think many of them would support the tariffs
06:52to help level the playing field.
06:53And I think what we would really hope
06:55is this would bring these other trading partners
06:58to the table to negotiate fair trade.
07:01The challenge we see with what's going on
07:03with a lot of the trade negotiations now
07:04is wine is just a pawn in a larger story,
07:07and the issues are about bigger issues.
07:09But I think none of us, you know,
07:11want to see tariffs in place permanently.
07:14I think what we really want to see
07:15is really free and fair trade.
07:17Some domestic producers,
07:19particularly in California,
07:20complain about unfairness from Europe
07:23because there are subsidies
07:25given to vineyards over in Europe.
07:28Are tariffs an effective way
07:30to deal with that problem?
07:31I feel really, really bad for those guys,
07:34but a tariff is not going to solve their problem.
07:35Farmers that grow grapes to sell until,
07:38for instance, grocery store boxed wine,
07:40and that's terrific for them.
07:42And it's a great product
07:44for, you know, certain customers.
07:45The demand for those products is collapsing.
07:48You know, people aren't buying bulk wine
07:50the way they used to.
07:53Whether tariffs could give some relief
07:55to bulk wine producers or not,
07:57they certainly would have unintended effects
08:00on the American economy overall.
08:02You have spent some of your time
08:04down in Washington trying to explain
08:05to lawmakers, policy makers,
08:08exactly what this would mean
08:09for the wine business.
08:11What would you want them to understand
08:13that maybe they don't understand right now
08:15about the business
08:15and the effects of tariffs?
08:17The United States has been talking about
08:19their concerns with respect
08:21to a trade deficit.
08:22We import more European wines
08:24than we sell American wines to Europe,
08:26but the reality is
08:27we have a huge economic surplus
08:30on the sale of European wines
08:32in the United States.
08:33You know, we import about $5.3 billion
08:36worth of wine from the European Union
08:39into the United States,
08:40but American businesses
08:42make almost $23 billion
08:45from the sale of those products.
08:47Making a big margin
08:49on wine for a restaurant,
08:51it is not a luxury.
08:53It is an absolute necessity
08:55for their very survival.
08:57If, in fact, tariffs do get imposed,
09:00what are the likely long-term effects
09:03on the wine business?
09:04Contraction.
09:05And you know what that means.
09:07Contraction means American businesses
09:10closing and firing all their employees.
09:13What about the uncertainty itself,
09:15quite apart from the tariffs?
09:16I mean, I'll tell you,
09:17I had phone calls from, you know,
09:20wine distributors who said,
09:21you know, my grandfather
09:23started this business.
09:25We were in terrific shape
09:27and growing and hiring in January.
09:30And now I might have to decide
09:32if I'm going to close the doors
09:33in two weeks.
09:34You know, when they're put
09:37into this position,
09:37when their choice is either
09:39to pay a tariff
09:40that they cannot afford,
09:41because these are small businesses,
09:44or don't bring in wine.
09:46Don't bring in the wine
09:47that represents 75% of the revenue
09:49for your next three or six months.
09:51You know, we had restaurants
09:52from South Florida say,
09:54in the summertime,
09:55we need Sancerre and Rosé.
09:57That's what keeps our businesses alive.
09:59And there really is no substitute
10:02for these products.
10:03One of our favorite Rio Hanzo.
10:05So in your wine store,
10:06you have Bordeaux.
10:08If you can't get the Bordeaux,
10:10will a customer say,
10:11that's okay, I'll take the cab?
10:13The answer flatly is no.
10:14We talk about terroir.
10:17It's a word that gets bandied about.
10:19It sounds fancy.
10:20It's foreign.
10:20But it really,
10:21all it means,
10:22terroir, land, terra,
10:24it just means the place, right?
10:25It's just geography.
10:27Part of terroir is the human element,
10:30the culture, the civilization,
10:32the people.
10:32The people who've been
10:34on this piece of land
10:35in southern Italy
10:36for multiple generations.
10:38They cook certain kinds of food.
10:41They make certain kinds of wine
10:42that go with those foods.
10:43And it's very specific, right?
10:46I mean, don't you love to drink
10:47an Italian wine
10:48when you're having
10:49your spaghetti and meat sauce?
10:51Schwartz is trying to hold off
10:53the administration
10:54as the lead plaintiff
10:55in a lawsuit challenging the tariffs.
10:58The U.S. Court of International Trade
11:00ruled in his favor,
11:01but the appeals court
11:02stayed the injunction
11:03to give itself time
11:05to hear the case.
11:06If the tariffs go into effect,
11:08four European wines,
11:10August 1,
11:12how long will it take
11:13before we see it in our lives?
11:16I think you'll start
11:16to see it pretty quickly.
11:18You know,
11:20the first tariffed wines
11:21have only now started to come in.
11:24So distributors have still
11:26been selling through some wines
11:27that didn't have tariffs on them.
11:29You're going to start
11:29seeing those prices come now.
11:31You're going to start
11:31seeing a lot less choice.
11:33You know, there are importers
11:33and distributors
11:34that have halted
11:36all of their shipments
11:36because they're not sure
11:37they can afford to bring them in.
11:38Now, at the same time,
11:40they have no substitutes for them.
11:42They're not buying
11:43more domestic wine,
11:44for instance.
11:44They can't afford to.
11:46They need to sell
11:46these European wines
11:47in order to buy
11:48more American wine.
11:49In a nutshell,
11:50American businesses
11:51are incredibly good
11:52at selling European wine,
11:54and they support
11:54huge numbers of jobs
11:55in the United States.
11:56Some of the most famous
11:57importers actually got
11:58into the business
11:59because they were in France
12:01or Italy during World War II,
12:02said,
12:03oh, my God,
12:03I love this.
12:04This is what I want
12:05to do with my life.
12:07And they're classic
12:08American entrepreneurial
12:09success stories.
12:11As a matter of fact,
12:11many of the most famous
12:13European wines
12:13in the world,
12:14they're famous today
12:16because they were discovered
12:17by American wine importers.
12:20They were brought back.
12:22They tasted 10,000 wines,
12:23said,
12:23these three are the best,
12:24and they were right.
12:25Funny story.
12:26One of the first guys
12:27to do that, by the way,
12:28was Thomas Jefferson.
12:29You know, he went to Burgundy.
12:30He bought Moorichet
12:31and Merceau Couture
12:32for he and George Washington.
12:34He bought Chateau de Chem
12:35for he and George Washington.
12:36And today,
12:36those are still some
12:37of the greatest wines
12:38on the planet.
12:39He had a pretty good palate,
12:39I think.
12:40And now, ironically,
12:42Americans' affinity
12:43for European wines
12:45nurtured by the likes
12:46of George Washington
12:47and Thomas Jefferson
12:48may be challenged
12:49by the most recent occupant
12:51of their high office
12:53and perhaps make it
12:54more difficult for us
12:56to enjoy that bottled poetry
12:57they discovered 250 years ago
13:00in fine French wines.
13:02Cheers, sir.
13:03Cheers.
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