US uncorks a bottle of job-killing wine tariffs on American firms

By Heather Scott

Would you pay $28 for a $14 glass of French wine?

Most people would balk and instead substitute a more reasonably priced option, from Australia or Virginia or California, which means the importer of that French wine, and the warehouse workers who stored it and the truck driver who delivered it all will find their jobs in jeopardy.

It's a bad time for the wine industry in the United States.

French, Spanish and German wines, with a few exceptions, have been hit by 25 percent US tariffs in a longstanding fight between the United States and the European Union over illegal government subsidies to aircraft manufacturer Airbus.

But President Donald Trump, who has repeatedly shown his preference for tough talk and steep tariffs, is threatening to raise those tariffs to 100 percent and remove the exemptions.

One wine importer already has had to lay off staff—including his own son.

"I just finished 35 years in business. Over that time I've probably fired eight or 10 people. They all had it coming and most of them were expecting it," said Dan Kravitz, founder of Hand Picked Selections, which specializes in wines from the French Mediterranean and Spain.

"I never laid off anybody until October 18," when the tariffs on wine and other European goods took effect.

Kravitz said he cut four of 13 full-time employees and two part-timers "and that included my son."

Raising the tariff to 100 percent would put him and many others in the industry out of business, he said in an interview.

Ironically, he started his wine importing business so that he could spend more time with his young son, shifting gears after years working in restaurants.

But in the changing business environment, his son's design skills became expendable.

Uncertainty means delayed investment 

Unlike Trump's multiple, unilateral trade conflicts—over steel, aluminum, autos and with China—the Airbus dispute predates his administration, and the tariffs on $7.5 billion in products from the European Union were authorized by the World Trade Organization following 15 years of litigation.

The tariffs are a bid to hurt European companies to pressure their governments to abide by global trade rules and withdraw the subsidies—which the United States argues allow Airbus to compete unfairly against Boeing.

But American businesses argue they are collateral damage in the dispute and many may not survive.

"They might be putting a sanction toward the EU but it's going to directly impact the small businesses in America and also the customers," said Shelley Lindgren, wine director and co-owner of A16, an Italian restaurant with locations in San Francisco and Oakland.

"So we're all going to lose big and maybe a lot of businesses will close for something not related to food and wine."

The Distilled Spirits Council of the United States said "jobs have been eliminated and hiring halted" due to the tariffs, "and up to 78,600 US jobs could ultimately be lost if these tariffs remain in effect or are increased."

Right now importers say they are working with their suppliers and growers, many of whom will share the burden of the tariffs so that prices to consumers can be absorbed or minimized.

But Kravitz said he also has had to hold off on planned investments—one project was for canned rose wine, to help keep wine from losing more ground to craft beer and craft spirits that have gained in popularity among American drinkers.

More tariffs in the pipeline?

A separate trade dispute over a French digital tax targeted at American tech giants like Amazon and Google, would strike another blow with tariffs planned on French sparkling wine.

Sunil Khanna, director of operations at Hand Picked Selections, said that, because of the tariff threats, "planning for 2020 has been a complete nightmare," forcing the company to negotiate a price for each wine they sell and find different wines for a national steakhouse chain and a national wine bar.

The company, like many in the industry, is expecting tariffs to hit sales this year but it is relatively lucky that more than a third of its wines are exempt from tariffs—for now—because of a higher alcohol content.

But they will be hit should the dispute escalate.

"There are a lot of livelihoods, hardworking Americans whose jobs are at stake here," Khanna said.

And should Trump carry out his threat to raise the tariffs to 100 percent, "it would be a job killer."

Matt Cirne, managing partner of Verjus, a wine bar in San Francisco, said a drastic increase would hit his business hard.

"With a 100 percent rise ... this is a $14 glass of wine typically and overnight it becomes a $28 glass of wine. That's not viable for anyone."

Kravitz confirmed it would be the end of his business.

"I will sell off the remaining wine to pay off my bills, put whatever is left over in my pocket and call it a career."

Topics: Wine , United States , Airbus , Donald Trump , European Union , Dan Kravitz
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