City Paper is not for tourists
Diane Gross doesn’t want to scrap her selection of wines by the glass and start anew, but she doesn’t see a choice. She’s had to raise prices on about 30 percent of her wines at Cork Wine Bar & Market since October, when the U.S. imposed a 25 percent tariff totaling $7.5 billion on some wines and other products from France, Germany, Spain, and Britain.
The price increases tied to the tariff are especially glaring for wines by the glass. With the tariff, a glass of Bourgueil from France would cost $5 more, bringing it past the $20 threshold. Glasses at the 14th Street NW wine bar are typically in the $10 to $14 range. Gross didn’t think the swollen price tags would sit well with customers, so she replaced some of those wines.
“Our job is to find things that meet the middle ground where our guests are comfortable,” she says, adding that Cork has focused on finding value for customers since opening 12 years ago. “We have to do that because that’s who we are and what we do.”
Gross and others employed in all facets of the wine industry—already anxious and frustrated—now fear that the situation could worsen into a crisis with enduring ramifications.
In mid-December, the Trump administration threatened to dramatically expand the 25 percent tariff to a proposed 100 percent tariff on hundreds of products from all European Union countries. Everything from wine, whiskey, swordfish steaks, and pineapple jam to tapestries, sweaters, and tweezers became pawns in a worsening dispute over aircraft manufacturing subsidies. If the escalated 100 percent tariff goes through, it would take effect in early 2020. The deadline to submit comments to the U.S. Trade Representative on the proposed tariffs is Jan. 13.
The Trump administration’s move stems from a May 2018 ruling when the World Trade Organization found that the European Union unfairly subsidized aircraft manufacturing to the tune of billions of dollars. The subsidies put France’s Airbus at a better competitive advantage than U.S.-based Boeing.
D.C. drinks more wine per capita than every state except Idaho, according to 2018 data from the National Institutes of Health (though a city-to-state comparison isn’t perfect). City Paper sought to understand the current impact of the existing 25 percent tariff as well as the potential consequences of the widely expanded 100 percent tariff. Among wineries, importers, distributors, retailers, restaurants, and consumers—no one escapes unscathed.
Swapping a California chardonnay for a French Chablis seems like a small-potatoes problem, but local experts contend that the attempt to deliver a gut punch to Europe is in reality threatening American small businesses and jobs in addition to pricing out American consumers from enjoying a robust variety of wines.
And Cork might be uniquely screwed. The neighborhood restaurant and wine retail shop exclusively serves and sells European wines, and most of their bottles are from small wineries that were brought over by small importers and disseminated by small distributors. Everything about the supply chain is boutique.
“All the distributors and importers I work with—they’re family-run, they’re small,” Gross says. She worries they won’t be able to compete with behemoth businesses, which are better positioned to absorb the costs associated with the tariff instead of passing them on to the restaurant or consumer. “This is their life’s work. It’s so upsetting on so many levels. The big importers are just going to absorb it. They’ll get bigger. The little guys just can’t do that.”
Nicholas Lewis, a wine enthusiast who works a couple shifts a week at Weygandt Wines in Cleveland Park, has been in contact with importers and distributors. The dust is still settling from October’s 25 percent tariff and now they’re bracing for further impact.
“It’s making them feel sick to their guts—especially the smaller companies,” says Lewis, who’s British. “Along the East Coast, I’ve had two different importers say, ‘I’m going to sell what’s in my warehouse and if this doesn’t go away in 12 months, I’m retiring early.’” Others sent him messages lamenting that their businesses won’t survive 2020.
“You’ve had these small companies that have been around through the ’80s,” Lewis continues. “They’ve seen financial crises. They’ve seen more turbulent times, worse times than the 25 percent tariff. But 100 percent—that’s uncharted territory. If they pull the trigger on it, it will change the wine scene forever in America.”
Prestige Ledroit Distributing Co. COO Alex Thompson concurs. “We were able to game plan around 25 percent increased costs, but it’s a lot more difficult if more products are impacted and it’s a 100 percent tariff,” he says. “It’s hard to wrap our heads around it.”
Thompson’s company is locally owned and operates in D.C., Maryland, and Delaware. “The trust we’ve developed with our customers is of paramount importance to us,” he says. “This uncertainty throws a wrench into the works in terms of being able to provide information to customers.”
Fortunately, Thompson says, Prestige Ledroit’s diverse portfolio offers the company some protection: “We have plenty of products to sell, both domestic and imported and both wine and spirits. Other small importers and distributors rely substantially or solely on products from these countries. You’re going to see a lot of small businesses hang it up once they run out of product to sell.”
The small businesses importing, distributing, selling, and serving wine don’t operate in a vacuum. “There’s all sorts of cottage industries around our industry as a whole that rely on this sale of goods,” Thompson explains, pointing to the ships that ferry the wine and the small customs brokerage firms that receive the wine when it arrives on U.S. soil. “The impact is much broader than those of us that sell European wine. And, the consumer will pay the ultimate price.”
Inevitably, wine retail shops and restaurants will need to pass some of the increased costs of European wines on to customers. Gross, for example, worries Washingtonians won’t be willing to buy a $30 bottle from her retail shop to pair with the roast chicken dinner they’re cooking when it used to cost much less. Meanwhile, Lewis says the $15-and-under section at Weygandt Wines has already become the $20-and-under section, and that’s just in response to the 25 percent tariff.
Some businesses are taking steps to educate the public about the tariffs, including new Truxton Circle wine shop Domestique. On Jan. 7 they’re hosting an “anti-tariff wine tasting” from 6 to 8 p.m. Importers will pour wines from their portfolios whose prices would be higher under the proposed 100 percent tariff.
But higher prices aren’t the only drawback. “The biggest impact I’ve felt as someone who runs the operations for a distributor is availability more so than price,” Thompson says. “Importers’ instinct is to delay bringing product over to the U.S. in the hopes that things will be resolved, making availability unpredictable. Things are out of stock.”
One of the best parts of drinking wine is the sense of exploration it offers. You can taste the terroir of different countries or even different villages, constantly refining your likes and dislikes along the way. “It’s going to be really hard to keep the choice and diversity of what we have for our guests if it happens,” Gross says. “Things people have enjoyed for years may double in price or go away.”
She believes businesses like hers need these wineries more than the wineries depend on U.S. consumption. “A lot of these wineries make a choice to sell to the U.S.,” she says, citing some of her grower Champagnes and wines from cult producers. They make such small quantities of sought-after wines that they could easily sell them elsewhere. “We’re lucky to get these beautiful wines. But if it’s going to cost them more, they’re going to sell to other places. ‘Japan, take my wine! The rest of Europe, take my wine!’”
Others wonder if the quality of wine will suffer if wineries have to seek out cost-cutting measures to temper a 100 percent tariff. “People won’t have the luxury of being biodynamic or organic if they have to find a cheaper way of making wine,” Lewis proposes. Making wine without chemicals and pesticides often requires more labor and grape yields are typically smaller. “We’re trying to be better for the world in wine, but you’re tying one hand behind their back,” Lewis says.
There are no clear winners if the 100 percent tariff is imposed on all wine coming in from European Union countries—not even American wineries, who would presumably stand to increase their market grab if consumers balked at higher prices of Burgundy and Bordeaux.
The president, don’t forget, purchased a Charlottesville, Virginia, winery back in 2011. The Trump Winery website now claims its registered trade name is Eric Trump Wine Manufacturing LLC.
Trade flows both ways, an article in VinePair explains. The European Union is the U.S.’s largest export market. According to the California-based Wine Institute, American wine sales to the E.U. totaled $469 million in 2018. The institute’s president and CEO, Bobby Koch, issued a statement in October arguing that Europe could fire back with its own tariffs, setting back U.S. efforts to grow exports. Retaliatory tariffs could be particularly devastating for California wineries damaged by wildfires in 2019.
Should the U.S. impose the 100 percent tariff, Lewis thinks that retailers and restaurants would ultimately have a “slightly easier time” selling domestic wines. But, he doesn’t support slapping tariffs on products unrelated to the trade war at hand. “I don’t feel like this is really helping out our nation,” Lewis says. “No matter who you vote for on the Hill, it’s making America look like a bully.”