- 4 days ago
Category
🗞
NewsTranscript
00:00President Trump put prohibitive tariffs on European wine back on the agenda this week
00:04when he lashed out at President Macron for refusing to pony up $1 billion
00:09to join the Council for Peace he's putting together to rebuild Gaza.
00:14Well, nobody wants him because he's going to be out of office very soon.
00:18So, you know, that's all right.
00:20What I'll do is if they feel like costal,
00:22I'll put a 200% tariff on his wines and champagnes and he'll join.
00:27Stocks reacted dramatically with shares of Paris-based luxury goods maker LVMH
00:34tumbling after the comments.
00:36If it all sounds a bit familiar, that's because it is.
00:40Last March, President Trump threatened similar tariffs,
00:42prompting our story about the business of wine
00:45and what tariffs could mean for the people who make and sell it.
00:48People like Victor Schwartz.
00:51It's been a mess.
00:54In New York, importer Victor Schwartz has spent nearly 40 years
00:59supplying restaurants and wine shops with hand-picked bottles from small European vineyards.
01:04Now tariffs threaten to upend the business.
01:07It's 20%, then it's 10%, then they threaten 50%.
01:10How different is the effect on your business of a 20 versus a 10?
01:13I mean, in our industry, end of the day, we might make 5% as a net profit, 5% to 10%.
01:22So, obviously, we can't afford 10%.
01:24We can't afford 20%.
01:26But 20% is really egregious.
01:3020%, I mean, think about what that does.
01:32God, you know, it makes a $20 wine, you know, $25, basically,
01:38because, you know, there's kind of a multiplier effect as it goes through the system.
01:42You know, it's a much bigger impact.
01:44And don't forget, when we raise a price,
01:47it's not as if the consumer just accepts it.
01:52Where do American customers for wine go if they decide the price is too high?
01:56I'm not going to buy that.
01:58Where are you going to find champagne?
01:59Where are you going to find Chateauneuf-du-Pape?
02:02Where are you going to find Chianti?
02:04You're not going to find it in Oregon or California.
02:06A Finger Lakes wine, let's just be clear, is nothing like a Napa Valley wine.
02:12Nothing like a wine from southern Italy or northern Italy or the center of Spain, etc.
02:18My gist is that these products are so connected to their place.
02:24And that's what's wonderful and interesting about wine.
02:27Otherwise, they'd be the wine company of the world,
02:30and it would come out of a spigot.
02:33Red, white, rosé, and sparkling.
02:36Done, right?
02:37But that's not why we love wine.
02:39And Americans do love their wine.
02:42In 2023, we consumed just under 900 million gallons of it,
02:47more than any other country in the world,
02:49with a value of over $107 billion.
02:52More than a third of that is shipped in from abroad,
02:57making tariffs a real issue for importers.
03:00But those in the business say it's not just the imports that will be hit.
03:04It's the entire wine ecosystem.
03:07Ben Anaf is president of the U.S. Wine Trade Alliance.
03:11He has a shop in Tribeca that sells fine wine,
03:15which typically goes for over $20 per bottle.
03:20Distributors and importers, even those, by the way, that represent U.S. domestic wines,
03:25about 75% of their revenue comes from imported wine.
03:29So that's one of the really interesting things about this.
03:32On the terrafront, all of the major domestic wine-producing organizations,
03:36from Wine Institute to Napa Valley Vintners to Wine America,
03:41they're all against tariffs on imported wine
03:43because they understand their domestic growers, their producers,
03:49rely on healthy wine distributors for access to market.
03:53Put another way, because state laws prevent domestic vineyards
03:57from supplying restaurants and wine shops, they need distributors.
04:02And the distributors rely critically on selling imports alongside their domestic wines.
04:08That's why those who import fine wines, like Victor Schwartz,
04:12and those who sell it to us, like Ben Anaf,
04:14have no doubt that tariffs will cripple their business
04:17selling both foreign and domestic wines.
04:20But there's another part of the business,
04:22the value wine business,
04:24where a bottle or its equivalent typically costs less than $11.
04:28And producers for this segment,
04:32like Stuart Spencer in California's Central Valley,
04:35say they need protection from multinational companies
04:38bringing in cheap, subsidized imports
04:40that force American growers out of business.
04:44There is a lot of what we call bulk wine
04:47coming in in these big 20-foot bladder containers,
04:50and it is this bulk wine that is really undercut in California grape growers.
04:54There is a lot of talk about the difference between free trade and fair trade.
04:58From your experience as a grower,
05:01but also from your dealing with Lodi,
05:04are there unfairnesses in some of the exports to the United States?
05:08I mean, it's a completely unfair market.
05:10I mean, we are competing in a global marketplace.
05:13The European Union spends, you know,
05:15over $2 billion a year between EU money
05:17and member state money propping up their wine sector.
05:21They are not only paying growers and vintners
05:25to distill excess wine and buy it up,
05:27but they're also paying them to plant new vineyards.
05:29And they spend hundreds of millions of dollars
05:31in market promotion all around the world,
05:33and the U.S. is the number one target market.
05:36They also have trade barriers,
05:37so it gets really complex when you get in the weeds,
05:40but we are not playing on a level field.
05:43Last year, California wineries,
05:44which make nearly 90 percent of U.S. wine,
05:48were stuck with more than 500,000 excess tons of grapes.
05:52Now, 77 million gallons of wine are sitting in storage tanks.
05:57And you can still see some of the grapes on the vines.
05:59We have thousands of acres of grapes
06:02that are being torn out right now.
06:04And we have small farms and family businesses
06:06that are up for sale
06:07because there's just not a prospect for them moving forward.
06:11My family's been in this for 50 years,
06:13and I talk to old-timers that have been in it
06:15for multi-generations,
06:16and they've never seen it as challenging as we are now.
06:1970 percent of all wine sales in this country
06:21is controlled by about a handful of five to six
06:24large multinational companies.
06:26They're bringing wine in bulk.
06:28They're blending it in with California wine,
06:30up to 25 percent and calling it American Appalachian.
06:34It's a federal loophole.
06:36We have millions of gallons filled up in tanks right now
06:40in California that don't have a home,
06:41but simultaneously 24 million gallons of bulk wine
06:44is poured into California,
06:46coming in at super low prices
06:48and undercutting the California grape grower.
06:50Are you in favor of the tariffs
06:52that President Trump is talking about?
06:53Well, I think if I was to speak to our 700 grape growers
06:57that I represent,
06:58I think many of them would support the tariffs
07:01to help level the playing field.
07:02And I think what we would really hope
07:04is this would bring these other trading partners
07:07to the table to negotiate fair trade.
07:10The challenge we see with what's going on
07:11with a lot of the trade negotiations now
07:13is wine is just a pawn in a larger story,
07:16and the issues are about bigger issues.
07:17But I think none of us want to see tariffs in place permanently.
07:22I think what we really want to see
07:24is really free and fair trade.
07:26Some domestic producers, particularly in California,
07:29complain about unfairness from Europe
07:31because there are subsidies given to vineyards over in Europe.
07:37Are tariffs an effective way to deal with that problem?
07:39I feel really, really bad for those guys,
07:42but a tariff is not going to solve their problem.
07:44Farmers that grow grapes to sell until,
07:47for instance, grocery store boxed wine,
07:49and that's terrific for them,
07:51and it's a great product for certain customers.
07:54The demand for those products is collapsing.
07:57People aren't buying bulk wine the way they used to.
08:02Whether tariffs could give some relief
08:04to bulk wine producers or not,
08:06they certainly would have unintended effects
08:08on the American economy overall.
08:11You have spent some of your time down in Washington
08:13trying to explain to lawmakers, policymakers,
08:17exactly what this would mean for the wine business.
08:20What would you want them to understand
08:21that maybe they don't understand right now
08:23about the business and the effects of tariffs?
08:26The United States has been talking about
08:27their concerns with respect to a trade deficit.
08:31We import more European wines
08:33than we sell American wines to Europe,
08:35but the reality is we have a huge economic surplus
08:39on the sale of European wines in the United States.
08:42You know, we import about $5.3 billion worth of wine
08:46from the European Union into the United States,
08:49but American businesses make almost $23 billion
08:54from the sale of those products.
08:57Making a big margin on wine for a restaurant,
09:00it is not a luxury.
09:01It is an absolute necessity for their very survival.
09:06If, in fact, tariffs do get imposed,
09:09what are the likely long-term effects on the wine business?
09:13Contraction.
09:14And you know what that means.
09:16Contraction means American businesses closing
09:20and firing all of their employees.
09:22What about the uncertainty itself,
09:23quite apart from the tariffs?
09:25I mean, I'll tell you,
09:26I had phone calls from, you know,
09:29wine distributors who said,
09:30you know, my grandfather started this business.
09:34We were in terrific shape
09:35and growing and hiring in January.
09:39And now I might have to decide
09:40if I'm going to close the doors in two weeks.
09:43You know, when they're put into this position,
09:46when their choice is either to pay a tariff
09:49that they cannot afford,
09:50because these are small businesses,
09:52or don't bring in wine.
09:55Don't bring in the wine that represents
09:5675% of the revenue for your next three or six months.
10:00You know, we had restaurants from South Florida say,
10:02in the summertime, we need Sancerre and Rosé.
10:06That's what keeps our businesses alive.
10:08And there really is no substitute for these products.
10:12One of our favorite Riojas.
10:14So in your wine store, you have Bordeaux.
10:17If you can't get the Bordeaux,
10:19will a customer say,
10:20that's okay, I'll take the cab?
10:21The answer flatly is no.
10:23We talk about terroir.
10:25It's a word that gets bandied about.
10:28It sounds fancy.
10:28It's foreign.
10:29But it really, all it means,
10:31terroir, land, terra,
10:33it just means the place, right?
10:34It's just geography.
10:36Part of terroir is the human element,
10:39the culture, the civilization, the people.
10:41The people who've been on this piece of land
10:44in southern Italy for multiple generations.
10:47They cook certain kinds of food.
10:49They make certain kinds of wine that go with those foods.
10:52And it's very specific, right?
10:54I mean, don't you love to drink an Italian wine
10:57when you're having your spaghetti and meat sauce?
11:00Schwartz is trying to hold off the administration
11:02as the lead plaintiff in a lawsuit challenging the tariffs.
11:05The U.S. Court of International Trade ruled in his favor.
11:09But the case has been consolidated
11:10with Learning Resources v. Trump,
11:13the Supreme Court case on the president's use
11:15of emergency powers to levy tariffs.
11:18If the tariffs go into effect for European wines,
11:21how long will it take before we see it in our lives?
11:24You're going to start seeing those prices come now.
11:26You're going to start seeing a lot less choice.
11:28You know, there are importers and distributors
11:29that have halted all of their shipments
11:32because they're not sure they can afford to bring them in.
11:34Now, at the same time, they have no substitutes for them.
11:37They're not buying more domestic wine, for instance.
11:40They can't afford to.
11:41They need to sell these European wines
11:43in order to buy more American wine.
11:45In a nutshell, American businesses
11:46are incredibly good at selling European wine,
11:49and they support huge numbers of jobs in the United States.
11:52Some of the most famous importers
11:53actually got into the business
11:54because they were in France or Italy during World War II,
11:58said, oh, my God, I love this.
12:00This is what I want to do with my life.
12:02And they're classic American entrepreneurial success stories.
12:06As a matter of fact,
12:07many of the most famous European wines in the world,
12:10they're famous today
12:11because they were discovered by American wine importers.
12:16They were brought back.
12:17They tasted 10,000 wines,
12:18said these three are the best, and they were right.
12:21Funny story.
12:22One of the first guys to do that, by the way,
12:23was Thomas Jefferson.
12:24You know, he went to Burgundy.
12:26He bought Mont-Rochet and Merceau-Couture
12:28for he and George Washington.
12:29He bought Chateau de Chem for he and George Washington.
12:31And today, those are still some of the greatest wines on the planet.
12:34He had a pretty good palate, I think.
12:35And now, ironically,
12:38Americans' affinity for European wines,
12:40nurtured by the likes of George Washington and Thomas Jefferson,
12:44may be challenged by the most recent occupant of their high office
12:48and perhaps make it more difficult for us to enjoy that bottled poetry
12:53they discovered 250 years ago in fine French wines.
12:58Cheers, sir.
12:58Cheers, sir.
12:59Cheers, sir.
12:59Cheers, sir.
13:00Cheers, sir.
13:00Cheers, sir.
13:01Cheers, sir.
13:02Cheers, sir.
13:03Cheers, sir.
13:04Cheers, sir.
Comments