Bracing for another blow: Restaurants, wine retailers suffer under 'airplane tariffs'

Tariffs imposed on European wines and foods have cut into the fragile profits of independent restaurants and wine shops. They could be getting worse.

An international trade war could kick the wine and food industry while it's already down. 

Still reeling from a worldwide pandemic, area restaurants, wine retailers and distributors are holding their collective breath as a potentially crippling increase in tariffs on wine, spirits and certain food items looms.

“Wine sales are really critical to the business model of restaurants," Ben Aneff, president of the U.S. Wine Trade Alliance says of an upcoming U.S. review of wine tariffs. 

"Right now, as local restaurants are trying to pick themselves up off the mat from this devastating crisis (COVID-19), the last thing they need is one of their critical profit centers ripped out from underneath them.”

The Office of the U.S. Trade Representative is in the final week of taking comments from the public on the state of current wine tariffs. Southwest Florida's restaurant and wine-shop owners are begging for your help. 

In October, the trade office imposed a 25% tariff on wines and a host of other European goods. The intent had little to do with food, and much more to do with politics — and airplanes.

The tariff was meant to punish the European Union for giving illegal subsidies to Airbus. It’s a cross-pond dispute that goes back 16 years. Instead of punishing European businesses, the October tariff has backfired on American restaurants, retailers, distributors and importers, a majority of which are independently owned.

Think about that affordable prosecco or chianti at your favorite Italian restaurant. If the tariffs increase again, you might have to pay double for it — if the restaurant can even get it.

“Taxes on wine and spirits are already high in Florida, a so-called 'sin tax' left over from Prohibition. Taxes on anything sparkling or bubbly are even higher,” says Jane Uttley, founder of Unfiltered Unfined Wines, a small wine distribution company headquartered in Fort Myers.

“When the first tariff was passed, many of the importers I work with stopped in their tracks,” Uttley says.

“We are still feeling the effects from that.”

How did wine get caught up in a trade war sparked by aircraft subsidies?

The trade office believed taxing luxury goods would cause such an uproar that it would force the European Union to take action regarding Airbus, according to Aneff. However, he says, “They don’t understand they are causing four times the damage in U.S. than in Europe.”

“The worldwide demand for fine goods from Europe has increased dramatically over the last 20 years,” wine importer Jean-Philippe Bourgeois says.

“If the tariff increases, European wineries will just reroute their production. The economic impact on Europe is zero.”

Bourgeois owns a small U.S. import business specializing in wines from France. He built his company 19 years ago by literally going door to door through French wine country, looking for family-owned wineries with no American distribution.

“Thomas Jefferson was the first fine wine importer in U.S., so trade routes are long established between the two countries," Bourgeois says. "Wine, cheese, food, there is a deep-rooted relationship.”

Naomi Biber, co-owner of Palace Pub & Wine Bar in Cape Coral says with so many U.S. businesses reliant on European imports, this tariff has been debilitating; increasing it could be devastating. Biber says the impact goes well beyond wine ratailers, such as Palace. It extends to cheese shops, locally owned food markets and wholesalers large and small. 

What about focusing more on domestically produced wines and ingredients?

Even though California, Oregon and Washington make world-class wines, distributors, retailers, and restaurants as a whole, don’t profit on domestic products alone.

“American people love their country, are very patriotic and will always drink wines from America,” Uttley says. 

“However, in the wine business we depend on a balance of products from around the world. Having access to all of these products, the freedom to buy them at a fair price, is part of the fabric of our country.”

Biber adds: “The beauty of wine is the history and the soil. Something made in Italy or France cannot be replicated here.

“Our entire business model is based on finding small, family-owned producers all over the world, so this tariff would be detrimental to our operations.”
 
It would also be detrimental for consumers who treasure food and wine from across Europe. Those products may no longer be available. If they are, the prices could be unrealistic.

For restaurants, pairing wines and dishes from the same region creates magic for patrons. Ratatouille, a savory stewed vegetable dish from southern France is divine with the herbal, crisp, red-fruit flavors in a bottle of wine from this same region of Provence. 

From northern Italy, a hearty dish of Cotechino di Modena sausage and lentils with a bottle of 2015 Famiglia Pasqua Amarone Della Valpolicella, a wine layered with flavors such as blackbery and tobacco, is seamless.

Some things just go together.

Aneff is appealing to all wine-loving and business-minded Americans to come to the aid of restaurants and retailers that depend on wine sales. Now through July 26, the U.S. trade office is taking comments online about the fairness of current tariffs and possibly increasing them by as much as 100%.

You read that right: a 100% tariff increase could be coming. 

“The worst part of the entire issue is that it has nothing to do with wine, cheese or luxury goods,” Biber says.

“The cause of this debate was an airplane part dispute. If that is the issue, then the root of the cause should be punished, not the hard-working people who have done nothing but share the beautiful history of wine.” 

The pandemic has been, as Aneff calls it, “an absolute disaster for all of America but in particular the hospitality industry. A tariff on wine is a shot in the gut to the restaurant industry, which is extraordinarily difficult even in the best of times.”

Bourgeois says the time to act is now. 

“We don’t know what will happen so we have to advocate and comment. Because of the pandemic, another increase in tariffs would be catastrophic.”

Source: News Press