Ursula von der Leyen News – No New Wine Tariffs, but Glassware Hazy

Wine lovers rejoice: the latest round of proposed penalties from the US Trade Representative does not contain a single new tariff on wine or spirits.

The US is proposing tariffs on a wide range of goods from six countries that have enacted digital services taxes that the USTR thinks are unfair to US tech company giants. Wine glasses are on the list, along with anchovies, caviar and shrimp. But no booze at all.

This is a sea change from the trade wars conducted by the Trump administration, which slapped tariffs on wine, whiskey and brandy over disputes that had nothing to do with alcohol.

“It shows that the USTR has begun to take seriously the damage that the first round of wine tariffs did to small businesses across the United States,” said Ben Aneff, president of the US Wine Trade Alliance.

It’s especially striking because wine was an obvious possibility for tariffs being proposed for Italy. Italian wine has gotten a pass to this point in the US trade war with the EU.

“Agricultural products make up a significant part of Italy’s exports,” Aneff told Wine-Searcher. “Wine would have been a really ripe target.”

The dispute started in the Trump administration, as many countries began levying taxes on Internet services that apply only to companies over a certain size. They appear targeted at Amazon, Facebook and Google.

Currently there are negotiations at the OECD (Organisation for Economic Co-operation and Development) to adapt an international tax system for multinational digital businesses. But in the interim, it’s up to individual countries.

Under Trump, in December 2019 the US threatened tariffs of 100 percent on Champagne in response to a digital tax imposed by France. France said it would not collect the tax in 2019, though it did not repeal the tax, and the USTR backed off of that tariff threat.

But the underlying dispute hasn’t gone away. Last week, USTR announced proposed tariffs on six countries that have enacted digital services taxes: Austria, India, Italy, Spain, Turkey and the UK.

Spain’s wines below 14 percent alcohol are already subject to a 25-percent tariff in the Airbus dispute, though this tariffs has been suspended for four months after an agreement between EU President Ursula von der Leyen and US President Joe Biden. Single-malt Scotch from the UK is similarly under a 25 percent tariff in the Airbus dispute that has also been suspended. So the USTR had to look for new products for those countries anyway.

But the wines of Italy and Austria have not previously been tariffed. Italy is the world’s top exporter of wine by volume to the US, so wine would have been an obvious choice. Instead, the USTR is proposing tariffs on Italian handbags, gloves, suit jackets, shoes, neckties, anchovies and caviar.

“The USTR had record-breaking protests against the damage [wine] tariffs do to US businesses,” Aneff said. “One thing that was surprising to USTR is you had no support for these tariffs from the US wine industry. US wine producers described to USTR how wine in the US is an ecosystem. They all rely on the same distributors and restaurants to survive. Typically if you have tariffs on pork products from overseas, US pork producers are thrilled. The US steel industry is strongly behind tariffs on foreign steel. It was important for USTR to see such a united front fighting against these tariffs.”

Glass half empty

Wine glasses are on the list of potential tariffs for Austria, which is home to several producers of high-end glassware, including Riedel, Sophienwald and Zalto.

If you are a glassware geek, don’t panic, says Stephan Schindler, owner of Winemonger in California, which imports Zalto glasses into the US.

“Since Zalto’s production has moved to Slovakia a while back, we might not be in the line of fire,” Schindler said. “It’s my belief that we might dodge this bullet.”

Aneff made this point about glassware production: if tariffs become an issue, Riedel or Sophienwald could move production to another country in a way that a Burgenland producer of Grüner Veltliner could not.

“The thing that separates wine from wine glasses, is we can honestly say, wine is not fungible,” Aneff said. “You cannot replace a wine from Bordeaux with a wine from another part of the world. It’s a different product. Place is so important in wine. You cannot make that argument with glassware. It’s easier for USTR to make the argument that wine glasses are fungible. If these things end up being longterm, you would see glasses being made elsewhere. The same companies would make them elsewhere. That’s not possible in the wine world.”

In fact, in 2004 Austria’s Riedel bought Spiegelau, which is based in Germany and thus not subject to tariffs in this dispute. How hard would it be for Riedel to switch production there?

Moreover, it’s hard to see the community of wine glass producers and importers lining up to protest these tariffs at the USTR the way the wine community did. Perhaps Eisch and Oneida are rubbing their hands today at the prospect of some extra business.

Schindler doesn’t think that the high-end wine glass business will be affected at all.

“I believe that people who buy Zaltos buy them for a reason,” Schindler said. “They tried them somewhere or they already had them in their cabinet. The decision to buy them comes first. These are all high-end glasses. They are less price-sensitive. If a tariff hits any of these brands, they would be partly absorbed by the retailers. If there is a price increase, I don’t think it will change the buying behavior of people who want to buy these glasses.”

However, if you have had your eye on a grand piano from Austria, be warned, they’re on the list.