French Winemakers Are Angry About Trump’s Tariffs. American Importers Are Even Angrier

January 10, 2020, 10:00 AM UTC

Off the two-lane road that cuts through Burgundy’s famed vineyards, a maze of narrow tracks and hairpin bends lead up into the hills, until you reach the picture-perfect, cream-colored village of Bouzeron. Here, farmers have been tending their vines for centuries, ever since the monks in the region began fermenting grapes in the Middle Ages. More than 500 years on, this tiny idyll hardly seems like an obvious site for an international trade war.

And yet behind a set of tall gates, one of the region’s 4,000 winemakers has spent the winter grappling with an unexpected and powerful new foe: President Trump. “Your president has imposed a 25% tariff,” fumes Pierre de Benoist, 45, owner of 74 acres of prime vines called the Domaine de Villaine, when I appear on his doorstep a few days before Christmas. “What do we have to do with all this? I’m a winemaker from Burgundy,” he says. ”It is like a teacher who does not know who to punish, so he punishes the whole class.”

That punishment is just one facet of the trade wars the U.S. is waging on multiple fronts, with Trump’s America First economic policy felt from Beijing to Brussels. But the conflict is sending shock waves through Burgundy, the region just west of the Alps where Pinot Noir and Chardonnay were invented centuries ago, and which now produces some of the world’s highest-priced, most coveted wines. 

Trump has been a vociferous critic of European Union subsidies that help Continental winemakers market their goods overseas. In recent months, however, disputes involving other industries have spilled over to swamp France’s wineries. In October, the World Trade Organization ruled against the EU in a case involving subsidies for France-based passenger-jet conglomerate Airbus, Boeing’s bitter rival. It also ruled that the U.S. could legally impose $7.5 billion in tariffs on European goods, as compensation. The White House wasted no time: On October 18, Trump announced 25% import duties on a hodge-podge of products, including French wines—effective immediately.

Far steeper oeno-tariffs could follow. In June, French President Emmanuel Macron signed into law a 3% “digital services” tax on revenues generated in France by tech companies making more than 750 million euros (about $833 million) a year. That levy, collected at the end of December, falls heavily on American giants Google, Apple, Facebook and Amazon, which have frequently been criticized for sidestepping local taxes by domiciling core operations in lower-tax nations. In December, Trump warned that he would retaliate with 100% tariffs on goods including French wine; those higher levies could soon become reality if a truce isn’t reached.

Aerial view of Burgundy’s Chateau de la Tour.
Courtesy of Chateau de la Tour

French Economy Minister Bruno Le Maire pleaded this Monday for U.S. officials to “return to their senses.” And next week EU trade commissioner Phil Hogan will make his first trip to Washington, D.C. in his new job, to press his case with U.S. Treasury Secretary Steven Mnuchin. But at least for now, the punitive tariffs loom menacingly over the wine industry—in France and the U.S. alike.

A scramble in Burgundy

In Burgundy, there is already a sense of impending doom. Winemakers have been scrambling to cope with penalties that kicked in without any negotiation. The October tariffs were effective immediately, trapping even exports that were already steaming across the Atlantic Ocean. 

“I had one order on the water that day, going to a new client in Oregon,” says Megan McClune, general manager of the Domaine Jessiaume winery, sitting in her headquarters in an old mansion in the village of Santenay, a short drive from Bouzeron. “They bought at one price, and by the time it landed it cost 25% more,” she says. (McClune says she gave the client a discount to compensate.)

McClune, who is from Boston, moved to Burgundy in 2004 to work in the wine industry, and she now ships about 12,000 bottles a year to the U.S. The States are Domaine Jessiaume’s biggest export destination, as they are for virtually every winery in Burgundy. The U.S. imports about $1.1 billion worth of French wine each year, accounting for 20% of France’s wine exports. In Burgundy, that share is about 30%.

Grape sorting at the Domaine Jessiaume winery.
Courtesy of Domaine Jessiaume Winery

The tensions over French wine had been simmering through much of last year. Trump—a teetotaler—has taken regular swipes at France’s wine industry, which is worth 13 billion euros (about $14.3 billion) a year, and is the country’s third largest export in value, after airplanes and luxury fashion. Trump has also tweeted his preference for American wines; “I just like the way they look, okay?” he told reporters last July.

That month, the wine squabble threatened to explode into a full-blown trade war, when French President Emmanuel Macron signed the tech tax into law. “If you do it, I’m going to tax your wine,” Trump warned Macron. At the time, France’s agriculture minister called Trump’s idea “completely moronic.”

But if France’s digital tax remains in place—as it looks likely to do—the already hefty 25% tariff could soon seem like small change to Burgundy winemakers like Benoist and McClureThe 100% tariffs that Trump has put on the table would also apply to sparkling wines like Champagne, which are exempt from the current 25% duties. Amid Burgundy’s neat vineyards and ancient villages, even as winemakers wonder whether the U.S. President will dare to carry out his threat, they have already begun eyeing new customers and markets. 

Historic ties

Until one visits Burgundy, it is hard to grasp fully the deep ties the winegrowers here feel with the U.S. Unlike the sprawling wine estates in Bordeaux—France’s other famous wine region—many of these vineyards are tiny family-owned operations, handed down through generations over the centuries.

In interviews, several winemakers recalled how they had built close friendships in the U.S. over the years, sent their children to study winemaking in California, and welcomed American winegrowers to Burgundy. Some recounted how Thomas Jefferson stocked his cellar in Monticello with Burgundy wines, after visiting the very same wineries in 1787. “This is a love story that has been going on for a long, long time,” says Louis-Fabrice Latour, 55, the seventh-generation head of his company Louis Latour Wines, which was formed more than 200 years ago. 

Today the company is Burgundy’s biggest producer of the top-ranked grand cru. “We started shipping wine to America just after the Civil War,” he says. These days, Latour’s exports to the U.S. are about two million bottles a year, and he operates a U.S. subsidiary in San Francisco. And yet he says the ties to the U.S. could easily shatter, if tariffs remain in place. “There are many growers who don’t want to ship to America anymore, saying their distributors do not want to pay the taxes,” he says. “Some just give up. They can live without the U.S.”

That would be a drastic change for Burgundy, and for French wine. Indeed, the dip in trade with the U.S. is already starkly evident. “Usually by this time I have all my January orders in,” says Thibault Huber, head of Domaine Huber-Verdereau in the village of Mersault. “I have had not a single U.S. order since October 18.”

American tariff, American pain

U.S. importers, meanwhile, fear they won’t be able to keep customers supplied with Burgundy wines. And that highlights an irony of the tariff threats: Those importers, many of whom deal exclusively in French or European wines, may suffer worse pain than the winemakers themselves if tariffs escalate.

Under ordinary circumstances, American wine merchants and distributors compete to buy the best Burgundy wines, which are produced in limited quantities. Winemakers in Burgundy talk of “allocations” of wines, in which they reserve shipments for favored U.S. clients long before they have bottled the wine. Ordinarily, U.S. wine importers travel to Burgundy in January to sample the year’s vintage and lock in orders.

But other countries could potentially begin to outbid the U.S., especially on Burgundy’s highest-priced wines, which sell for $2,000 a bottle in U.S. restaurants. “A lot of importers in Russia and China ask me if they can buy my wine, but I have nothing to sell,” Huber says. “But if my U.S. business stops I can quite easily sell elsewhere. The bottles will not stay in my cellars for long.”

For now, the 25% tariff is deeply painful, but not necessarily a mortal threat to the trade. Trump’s threatened 100% tariff, on the other hand, would be a seismic jolt. “It will pretty much mean the destruction of the modern wine industry as we know it,” says Steve Melchisky, president and owner of USA Wine West LLC, from his base in Portland, Maine.

Americans, who consume by far the world’s most wine, produce only about two-thirds of their own; much of the rest comes from Europe. But Melchisky foresees a steep drop in consumption if taxes soar under Trump’s plan. “Who would buy a $15 Bordeaux that suddenly costs $35?” he says. Nobody.”

The same day I arrived in Burgundy in mid-December, U.S. importers began a frenzied lobbying effort, bombarding U.S. Trade Representative Robert Lighthizer with thousands of letters in which they explained that Americans would likely lose out big if Trump carried out his threat to impose 100% tariffs. The tariff would “effectively shut down the access Americans have to European wine,” wrote Kermit Lynch Wine Merchants of Berkeley, Calif., to Lighthizer; the company has imported French and Italian wines for 47 years. “The network and ecosystem that manages and sells these wines would be gravely threatened.”

Kermit Lynch president Dixon Brooke tells me he believes Burgundy winegrowers are already rethinking their dependence on the U.S.—even if Trump drops his plan to impose 100% tariffs. “Allocations could well be sold elsewhere, and may not come back to the U.S.,” he says.

Vineyards at Chateau de la Tour.
Courtesy of Chateau de la Tour

Over lunch one day, François Labet, owner of Burgundy’s Chateau de la Tour and head of the Burgundy Wine Board, says he believes winemakers will ship their bottles elsewhere if U.S. tariffs continue to climb higher.

Even those in Burgundy, he says, face huge challenges, including diminishing yields from erratic weather and climate change; Spring frosts have killed crops several times in recent year. “Everyone forgets we are farmers, fruit producers,” he says.

So what if Trump imposes 100% tariffs? Labet laughs. “We will go to Lourdes and pray to the Virgin Mary to ask Trump to be more reasonable,” he says, referring to France’s pilgrimage site for Catholics. Across the ocean, U.S. importers are praying even harder.

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