Just in time for Valentine’s Day, that glass of Bordeaux has gotten a lot more expensive than it was only a few months ago.
Price hikes are reaching consumers after the U.S. Trade Representative’s October announcement of a 25 percent tariff on wine imported from France, along with select food and wine imported from other European Union nations: Germany, Italy, Spain, and the United Kingdom.
Before the increase, the tariff on imported wine was just 5 cents per bottle of still wine. Compare that to the $10 now being tacked onto a $40 bottle of French wine. Why is this happening? It may sound weird, but essentially this is a fight about airplanes.
“There is a perception, true or not, that the European countries have been subsidizing Airbus and making it uncompetitive for Boeing,” says Chris Taylor, associate professor and director of the Beverage Management Program and Fred Parks Wine Cellar at the UH Hilton College of Hotel and Restaurant Management. For its part, the E.U. has accused the U.S. of doing the same thing for Boeing.
In 2018 the World Trade Organization sided with the U.S. on the matter, giving the Trump administration permission to even things up by putting tariffs on $7.5 billion worth of European products. In October the U.S. announced a 10 percent tariff on aircraft imports, plus a 25 percent tariff on a lot of the really good stuff we bring in from Europe.
While the products selected for these increased tariffs may seem random—hitting Spanish olives but not other Spanish foods, for example—experts suggest many of the targeted goods have been chosen deliberately, because they are symbols of their countries’ cultures.
America imports more French wine than any other country, snapping up $2.16 billion worth of still and sparkling bottles in 2018. Despite the tariffs’ announcement months ago, it’s taken a while for consumers to feel the pinch. Why? Shops and restaurants with deep wine lists have had the inventory necessary to keep prices down for a period. Things start to change once wine buyers have to order new shipments, which are taxed when they arrive at our ports in container ships.
Consumers are already paying more for wine because of America’s three-tier system for alcohol distribution—a post-Prohibition attempt to make wine more expensive and keep Americans a little more sober. The system bars American retailers from buying directly from producers and importers, raising prices. “We’re at the mercy of a distributor,” explains David Keck, partner at Goodnight Hospitality, which operates several restaurants plus a shop, Montrose Cheese & Wine. “We have one more step in that process, so by the time it gets to us it’s exponentially more expensive.”
So given everything, what could have been a $12 glass of Bordeaux will now be more like $17. “It’s an unfortunate thing for wine drinkers everywhere,” says Taylor, adding that the hardest-hit establishments likely will be large retailers and big-money restaurants like steakhouses.
Meanwhile, although French champagne was spared in October, in December the Trump administration threatened to levy a 100 percent duty on various French products that hadn’t been included in the previous round, including the country’s bubbly, which as of press time continues to be tariffed at 14 cents per bottle.
This potential new tariff has nothing to do with airplanes. Instead, U.S. trade officials have been incensed over France’s 3 percent tax on digital services provided by Facebook, Amazon, Apple, and other U.S.-based tech companies. (French officials insist that they are not targeting American companies with this particular tax.) While as of press time the administration’s threat remains just that, now might be a good time to stock up on your Veuve Clicquot. The U.S. trade agency is planning a public hearing on the growing tariff list, to take place this month.
On top of all of this, in December the WTO ruled that Europe was still in the wrong over those Airbus subsidies, meaning October’s 25 percent increase on still wine and other European products could increase.
Houston restaurateurs say they’ve never seen these kinds of wild shifts in product taxation. “It’s the wild west,” says Keck, adding that all he can do is respond to shifting markets.
This month restaurant-goers also may notice that their eggplant parmigiana and Caesar salads have gotten more expensive. Typically those dishes contain Parmigiano-Reggiano, which can be made only in a particular region of Italy, and which is subject to the October tariff increase. “That product specifically is what we spend the most on at Coltivare,” says Ryan Pera, partner at Agricole Hospitality, the restaurant group that operates the popular Heights-area Italian restaurant. “I cannot not use that product.” In order to maintain its profit margins, the restaurant will have to pass some of that cost to customers.
So how long will these tariffs be in place? At the moment it’s hard to say. “If we elect a new president, it’ll change. I guarantee it’ll change,” says Taylor. “But as long as this president is in office, I don’t see these going away.”