For some time now, the wine sector has faced major challenges, from the pandemic to labels on potential health risks to duties. The wine sector represents a fundamental item among trade exchanges, especially in Italy.
We ask to Nicola Angiuli of Francoli USA, a professional with over thirty years of experience in exporting Italian wine, his thoughts on the matter.
The challenges of wine are increasingly complex. With the pandemic over, we are now trying to deal with the era of rising tariffs. The possibility that US tariffs could upset the markets has been known for a few months. How did you behave before the news became official?
It may seem like I’m avoiding the question, but it’s demanding, as the answer can change almost daily. We are experiencing uncertainties about imposed and delayed tariffs, which have significantly harmed the American economy.
Let’s review tariffs. They’re essentially federal taxes applied to goods arriving from foreign countries.
Wine importers pay a tariff, which is then passed on to consumers, who are directly affected by having to pay more for an imported bottle of wine.
Some argue that tariffs generate revenue for the U.S. government, which can then be redistributed to domestic producers and lower consumer taxes at the expense of foreign countries. However, that is not how tariffs genuinely function. Tariffs are likely to impact employment due to their effects on the economy, and the term I am looking for is “retaliation”. The ongoing trade battle with Canada will cause California wineries to lose their largest export market. Additionally, American wineries are facing higher production costs because most wineries import materials such as bottle glass, corks, labels, cardboard boxes, oak barrels, and farming equipment, all of which are now subject to tariffs. The cost of doing business with the United States will significantly rise, leading to significant economic challenges as wine businesses grapple with supply chain issues and excessive bureaucracy. I hope this administration uses tariffs as a negotiation tool and will opt for “zero tariffs” and free trade.
And now, how are you working to limit the damage?
To mitigate the damage, we must unite and ensure our voices are heard.
First, we must educate consumers about how tariffs will economically impact them through higher wine prices and fewer choices.
Second, importers, distributors, and retailers should actively communicate with elected officials, outlining how they have been affected and emphasizing the adverse effects of tariffs on their businesses and the broader wine industry.
In conclusion, we should have more articles written in this style.
How are the wineries you represent reacting to the idea of a significant increase in prices?
Wineries are taking steps to provide financial support and are expressing deep concern about the potential financial difficulties that could arise from the U.S. administration’s proposed tariffs on wines. It’s important to remember that in 2019, a 25 percent tariff was imposed on European still wines as part of the Boeing airplane trade dispute. As a result, exports to the U.S. fell by 15 percent in volume. Furthermore, American wineries did not experience a measurable increase in wine sales.
What do you foresee for the medium-term future based on your experience?
Overall, the forecast appears grim. If a 20 percent tariff is implemented, higher prices could lead to declining wine consumption, as consumers may choose cheaper alternatives. Many low- to mid-range wine brands may find it challenging to compete in the U.S. market.
Additionally, the European community might respond with tariffs on U.S. goods, potentially escalating the trade war and further affecting businesses on both sides. This situation could harm the domestic wine market, impacting farmers, vintners, distributors, retailers, and the millions of people working throughout the wine supply chain.
However, I anticipate that Italian wines may not be as negatively affected as those from other European countries, as Italy produces a wider variety of wines than any other nation. To illustrate, there is only one Brunello, Gattinara, or Prosecco, among many others. I could elaborate further, but that would make this article excessively long.
Why can’t Italian Wine Lose the US Market, Despite Everything?
Recently, I read an article that ranked the finest cuisines in the world, with Italian cuisine taking the top spot.
Our culinary excellence will enhance the popularity of Italian wines.
Italians are naturally creative, and we consistently succeed in our endeavors.
I want to share a fun story highlighting our rich Italian heritage.
Back in the 1920s, when the U.S. imposed a ban on selling and drinking alcohol, Italian-American winemakers in California found a clever solution: they began selling grape concentrate along with instructions on how to avoid fermentation, allowing consumers to change the instructions and ferment the grape juice into wine. One has to wonder where California’s wine industry would be today if Italian growers had not figured that out. Today, some of California’s most extensive family-owned vineyards are owned by Italian-American families, like the Franzia family, which originated from Genova, to name just one of many.
How does your long commercial experience lead you to act in this crucial historical moment?
If the tariffs are implemented, we will likely see higher prices and a decrease in demand, particularly for French wines. However, there will still be a strong demand for Italian wines.
The big question remains whether a deal between the U.S. and European administrations can be reached, and I am still hopeful that one will be reached.
