The United States has applied an additional 25 percent tariff on imports of steel and aluminum. Unfortunately, this protectionist move has sparked a simmering trade war with the European Union (EU), which threatens to upend the already volatile American alcohol industry. In retaliation, the EU threatened increased tariffs on American whiskey and other goods. This move resulted in immediate retaliation threats from President Trump on European-made alcoholic beverages to the tune of tens of billions. American makers of wine and liquor are caught in the crossfire. First, they pray publicly for deescalation and peace, then rush to create contingency plans. The Mastroianni family, good friends of the Cuneos, run a successful winery in Sonoma County. They are hit the hardest, as hundreds of cases of wine headed for Canada now languish in limbo.
For the time being, American producers have received a reprieve as the EU has cancelled retaliatory tariffs. This delay is intended to provide additional time for negotiation and further address the escalating trade tensions. At the same time, Canadian shelves have emptied of American wine and liquor as the industry continues to navigate growing unknowns. The U.S. is Canada’s largest wine export market, comprising 35% of exports valued at $435 million. This makes the threat of tariffs even more consequential for the industry.
With the threat of these tariffs hanging over their heads, the Mastroiannis are looking at extreme steps to avoid the pending tariffs. They’re looking at offloading shipments outside the U.S. Despite these complications, many in the industry are still optimistic. They believe that further deliberation can lead to an acceptable result.
Impact on American Alcohol Industry
The initial imposition of tariffs has already caused devastating ripples throughout the American alcohol industry. The Mastroianni family-owned winery in Sonoma County, with its warehouse stocked with hundreds of cases of wine packaged for Canada, is emblematic of the challenges faced by producers. This lack of clarity regarding tariffs has all but frozen the shipping of wine into Canada. This crisis has not only led to a stop of new contracts with grape growers.
Natalie Collins, commenting on the industry's current state, noted the stagnation caused by the tariffs:
"There aren’t a lot of purchasing decisions being made," she said.
So far, everyone from lumber producers to manufacturers are beginning to feel the brunt of the trade war. They live through its harmful impacts on the ground.
Strategic Moves and Considerations
Behind the threat of enormous tariffs, American producers of wine and spirits are developing new plans to avoid their effects. The Mastroiannis have even thought about rerouting shipments just to cut out the imposition of the tariff entirely. Phil Mastroianni expressed their dilemma:
"We’ve even thought, ‘Maybe we’ll just turn the thing around and say take it back,’” he stated.
Such extreme actions highlight the desperation being faced by producers seeking to make sense of an ever more complicated trade situation.
It’s early days and there are many hurdles, but there is some cautious optimism that President Trump’s self-styled persona as a dealmaker could usher in a solution. Phil Mastroianni shared his hopes:
"I think one thing that’s clear is President Trump is a dealmaker, and we’re thinking that the 200% tariff might just be a negotiating chip. And we’re hoping that he’ll help strike a deal that leaves wine and spirits out of it."
Hope for Resolution
The EU’s choice to postpone retaliatory tariffs provides a short–term sigh relief for American winemakers and liquor producers. This momentary breather between escalations gives a small opening for possible negotiations that could spare the industry from further escalation if not destruction. The Mastroiannis and their peers are optimistic that this delay will give time for a productive conversation and hopefully reach a long-term resolution.
For others, like Natalie Collins, the tariffs are an opportunity to help make things fairer for California wines. That perspective has a lot to do with all the turmoil in the rest of the industry. Trade paralysis still weighs heavily on producers.
