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Columbia Business Monthly

Pour One Out: Trump’s wine tariffs and how they’ll impact South Carolina

Feb 06, 2020 11:09AM

By Doug Aylard

First, I want to preface that I own a wine shop in Columbia and these tariffs are putting my livelihood at risk. My shelves are filled with wines from the European Union. We’ve got wines from Slovenia to Spain and everywhere in between. 

For those that don’t know, these tariffs, officially, are in response to Airbus getting subsidies from the E.U. Politics aside, the reasons for the tariffs are a little silly. If you want to punish France and the EU for these subsidies, then one would think to apply these tariffs to like industries. 

‘Just sell American’

Many are quipping this as a solution to the tariff. My response is, “Daniel Island tomatoes, Prince Edward Island mussels and Idaho potatoes.” Sure, you can grow tomatoes and potatoes in your backyard, but the reason these foodstuffs are highly sought after is because they are from those respective places. It is the place that gives agricultural products their je ne sais quoi; American and other New World wines just don’t have the same character as their European equivalents. Not to mention that American wine producers just don’t have the capacity to replace the wines brought in from Europe. 

Wine alone added $70 billion to the American economy last year; $23 billion was from domestic wines. In doing the math, American wine producers would have to triple current production levels to meet the demand for domestic wine needs. As my friend and winemaker Jerry Sass said, “That ain’t just gonna %&*@ happen.”

It’s the economy stupid

What a lot of people don’t know is that there already has been a 25% tariff assessed back in October. An importer friend of mine said the only people who suffered under that one were the dockhands who were laid off to help “absorb” that particular tariff. 

I know you’ve been waiting for the impact to South Carolina. So, here it is. These are some numbers you need to know: The average retail markup for wine, from the importer all the way down to the store level, is around 32%. Granted Costco and Sam’s Club bring that number down, but those numbers don’t exactly blow the doors off the bank account. With these figures, “absorbing” these tariffs just cannot happen.

Another number to know is 65%—which is an estimate. That’s the percentage the average restaurant in downtown Charleston has in Euro-centric wines. We all know that a restaurant has a premium added to a bottle of wine, but a healthy markup in beverages allows a restaurant to stay alive. If you sit down and think about it, there are Euro-centric restaurants open all over this state. Black Rooster in Columbia (French), Charleston has Estadio (Spanish), and Greenville has North Hampton Wine & Dine (Europe in general); all will have to raise their prices if this tariff goes through. They will have to raise their prices on the highest-grossing items in the entire restaurant, thereby killing all that revenue that is needed to keep the doors open. This will not only result in laying off servers and dishwashers, adding to unemployment numbers, but will also result in lost tax revenue for the state and municipalities.

The not-so-punitive nature of these tariffs

If one thinks that losing the entire American wine market will hurt the European wine industry, I have one word for you: Asia. 

Over the past four years, Asian wine markets have grown an average of 65% each year. All these winemakers will just turn around and sell their goods there.

Asia isn’t the only market for potential growth. An importer friend of mine who has the Caribbean and South America as a territory has already redirected U.S.-bound containers south. 

The only thing this tariff will do is give French and Italian winemakers a reason to leave long established contracts with American importers and ship their wines somewhere they will get more money for them—not exactly a harsh lesson learned. In the end, the European Union won’t be harmed, but hundreds of thousands of jobs in the U.S. will be.

Doug Aylard is the owner of the Vino Garage in Columbia. He has worked in the wine industry since 1995, from retail to wine bars to distribution.