Why is President Donald Trump suddenly concerned about getting U.S. wine into Europe?
“France charges us a lot for the wine. And yet we charge them very little for French wine,” Trump told CNBC on Monday, promising that he would “do something” about that.
The president argues he wants to right long-standing wrongs against the asymmetric tariffs of the European Union, whose pernicious effects are amplified by the undervaluation of the euro.
However, the truth is in all likelihood more prosaic: it’s because his own trade policies have just closed off the U.S. wine industry’s fastest-growing export market: China.
The effects of tit-for-tat
U.S. wine exports to China had more than doubled in the 10 years to 2017. Then the trade war started. China raised tariffs on U.S. wine imports of 10% in April last year and a further 15% in September in retaliation to U.S. measures. As of June 1, when the U.S. slapped tariffs on another $125 billion of Chinese goods, China upped its tariff on U.S. wine 15% again. The total import tariff on U.S. wine entering China is now 93%, according to The Wine Institute, an industry association.
“This is the third Chinese tariff increase on U.S. wine in the past 14 months, and with each additional round, it becomes more and more difficult to compete in the fastest-growing wine market in the world,” said Wine Institute President and CEO Robert P. Koch at the time. “It is imperative to resolve this dispute as soon as possible, so that our wineries do not suffer long-term market loss.”
The damage has been swift and serious. U.S. wine exports to China fell 13% by volume last year, and 25% by value. The fact that unit revenue fell so sharply appears to support Trump’s argument that the pain of tariffs is felt more by exporters than importers—an irony that won’t be lost on Sonoma Valley. The Wine Institute did not immediately provide a comment on the drop in value, but it’s possible that exporters are indeed willing to sacrifice profit margin to defend market share.
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