With Donald Trump’s potential return to the U.S. presidency, the French wine industry is bracing for another economic jolt. The 2019 tariffs on French wines—infamously dubbed the "Trump tax"—remain a fresh memory, having hit the industry hard.
At the time, the Trump administration imposed a 25% tariff on French still wines with an alcohol content under 14% and packaged in bottles smaller than two liters. This decision was in retaliation for a European subsidy dispute involving aircraft manufacturers Airbus and Boeing, but the impact reverberated far beyond aviation. French wine exports to the U.S. plummeted by 28% between October 2019 and September 2020, leading to sharp concerns about a new wave of punitive tariffs under a Trump administration.
The Vital Role of the U.S. Market for French Wine
For French wine producers, the United States is an essential market, representing 22% of total export volume and valued at approximately €3.6 billion, according to the Federation of French Wine and Spirits Exporters (FEVS). The 2019 tariffs didn’t just shrink French wine sales in the U.S.—they gave competitors, particularly Italy and New Zealand, a substantial advantage. Their wines were unaffected by the tariffs, giving them the upper hand in the American market while French exporters were forced to pivot. To navigate the tax, some French producers began exporting bulk wine or wines with an alcohol content above 14%, which were exempt from the tariffs. However, these strategies came with their own set of complications and added costs, underscoring the vulnerability of the industry to shifting trade policies.
Unresolved Issues and Mounting Concerns
As soon as Trump’s recent electoral victory became clear, key figures in the French wine industry voiced their apprehension. Jean-Marie Fabre, president of the Vignerons Indépendants, commented on how the tariff suspension enacted in 2021 did little to resolve the root issues of the trade conflict. “The threat remains real,” Fabre warned, emphasizing that the American market is still critical for many French appellations. He highlighted the risk posed to smaller producers whose survival depends on this profitable export relationship. With Trump’s potential return to office, Fabre and other stakeholders are urging the French government and the European Union to initiate talks with Trump's transition team to prevent a repeat of the 2019 trade dispute.
Calls for Proactive Measures by the EU and French Government
Institutions such as the FEVS are actively pushing for swift diplomatic intervention. The organization has called on French and EU leaders to prioritize dialogue with Trump’s incoming administration, hoping to avert another damaging round of tariffs. Thierry Breton, former European Commissioner, has stressed the need for France and the EU to prepare for a transactional approach in dealing with Trump, who is known for leveraging economic sanctions as negotiation tactics. Breton suggests that only by proactively engaging in dialogue can France potentially avoid the economic fallout of new tariffs on its wine exports.
Industry Adjustments and Strategic Shifts
The last round of tariffs forced French wine exporters to make significant adjustments. Florian Ceschi, director of the Ciatti brokerage firm, explained how the 2019 tariffs encouraged a shift toward exporting bulk wine and using alternative formats like Bag-in-Box (Bib), both of which were exempt from the tariffs. While these approaches helped mitigate immediate losses, they weren’t without risks. Bulk exports and alternative packaging formats may require substantial investments and complicate relationships with U.S. distributors, many of whom prefer traditional bottle presentations.
Strategic Adaptation and Risk Management for French Wineries
Foued Cheriet, a wine marketing expert and professor at the Montpellier Institute of Vine and Wine, advises that French wineries consider diversifying their export markets and renegotiating terms with U.S. importers. He also suggests that accelerating exports in anticipation of new tariffs could be a viable approach, allowing producers to get ahead of potential economic disruptions. This strategy, however, would necessitate the capacity for high-volume storage, a hurdle for smaller producers with limited financial resources.
A Broader Economic Picture: Challenges for the U.S. Wine Industry
Ironically, the American wine industry is also grappling with challenges. Similar to Europe, U.S. producers have faced production and distribution hurdles, especially post-pandemic. According to Florian Ceschi, the internal struggles of the U.S. wine industry—combined with pressing foreign policy issues like the conflict in Ukraine and trade tensions with China—might mean that wine tariffs won’t be a top priority for Trump’s administration if he resumes office. Nevertheless, French exporters remain cautious; any complacency could be costly if tariffs are reintroduced with little warning.
A Decisive Period Ahead
The coming months are expected to be crucial for French wine producers as they navigate the prospect of Trump’s return to the White House. Many are hoping that the international community will heed their concerns and work proactively to prevent a repeat of the damaging “Trump tax” era. But even as the French industry looks to safeguard its U.S. market share, it must also prepare for a future that might require broader market diversification and innovative trade strategies.
Source: Vinetur