How Trump’s Tariff Threats Will Affect the Wine and Spirits Industry and Consumers

To offset the increased cost of a tariff, sometimes the importer can negotiate with its foreign supplier to reduce the price of the good. Alternatively, the importer may absorb part of the cost by reducing its own profit margin. Or it can pass the added expense onto its customers by raising prices. But whether producer or importer, restaurant or retailer, the bulk of the wine and spirits industry already operates on perilously low margins, says Skurnik, and many are “barely holding on for dear life right now.”

How do tariffs affect American businesses?

Tariffs also place a heavy strain on the already fragile American restaurant industry. Restaurants famously operate on razor-thin margins, often relying on higher profit margins from beverages to stay afloat. Imported wine and spirits, especially, are critical profit centers. “What most people don’t understand is that those profits aren’t a luxury, they’re essential for survival,” Aneff says.

Do tariffs at least benefit American wine and spirit producers?

Not necessarily, explains Hardy Wallace, the Napa winemaker and owner of Extra Dimensional Wine Co. Yeah! “It’s more likely that tariffs will increase costs for both foreign and domestic wine,” he says. American wine and spirit producers rely on the same distributors as foreign producers, “so if distributors are feeling the squeeze on imports, they have to make that cost up with domestic [products].”

Moreover, domestic producers of alcoholic beverages rely heavily on imported goods to make their products. Universal tariffs will undoubtedly increase production costs for domestic wineries, Wallace explains. “We’re already experiencing historical highs on prices for anything from tractors and presses to barrels, glass bottles or closures—anything we use in winemaking costs 40% more than a few years ago,” Wallace says. Because there’s so much pressure from consumers to keep prices low, Wallace has only increased prices on his wines by 10%.

Why do tariffs matter right now?

An escalation of retaliatory tariff wars is especially dire right now for American distillers and farmers supporting the spirits industry. American whiskey producers were already bracing for a potential 50% tariff on American whiskey by the EU set for March 2025. Now, they fear retaliatory tariffs from Mexico and Canada, their two largest trading partners, are looming. In 2018, when the Trump administration imposed tariffs on European steel and aluminum, the EU retaliated by hitting American whiskey with a 25% tariff, causing whiskey exports to plummet by 20%. As demand plummeted, the tariff effectively shut out most small American whiskey producers from European markets altogether.

Many in the wine and spirits industry fear that a new wave of tariffs will hit the American economy even harder this time around. Inflation is a greater consideration today, and for the first time in decades, wine and spirits consumption are declining worldwide. Many fear that increased costs due to tariffs will prompt consumers to simply drink less. If the previous Trump administration was any indication, tariffs on imported wine don’t tend to increase sales of domestic wines, says Skurnik.

We make plenty of wine in the US. Why do we need to import it from elsewhere?

Wine isn’t fungible, or interchangeable, in the same way that steel, or commodities like wheat or milk might be, Skurnik explains. Spectacular Chardonnay is made in California, Oregon, or New York today, but Chardonnay from Chablis or Champagne in France are totally unique products. A kabinett Riesling from the Mosel in Germany, a Syrah from Walla Walla in Washington, and a sherry from Jerez in Spain are each singular products that can only be produced in a specific place. “If you’re a wine lover, it’s these unique experiences from all over the world that you crave,” he says.