Trump imposed tariffs of 25 percent on billions of European goods in the fall of 2019 and that included tariffs on European wine and spirits that are sold by American-owned businesses here in the United States.
Some businesses were able to eat the initial tariffs to honor existing contracts and orders, but the Trump regime has begun the process of raising the tariffs from 25 to 100 percent and very few if any businesses will be able to eat that. And it's not just because a tariff of 100 percent will make certain products unprofitable.
Importers of European wine and spirits won't be able to eat the larger tariffs because, in some cases, they only get paid for goods after the fact while import duties are due immediately.
Some analysts point to price increases as the easiest short-term solution for importers and distributors. But America’s fragmented three-tier distribution system makes things much more complicated than that.
“A smaller wine import business like mine relies upon the payment terms growers extend to me, which range from 60 to 120 days,” Frederick Corriher, who founded a French wine import company in his own name, explains to VinePair in an email.
Corriher, who is based in Charleston, S.C., in turn gives his wholesale customers 30 to 45 days to pay him back, which theoretically gives him a 15- to 75-day buffer to repay growers. But the tariff payments are due when the wine arrives at port, long before he receives any cash. “Only a mature, cash-heavy business or individual could continue to operate with this altered cash flow timeline,” he writes.
Some business owners who spoke VinePair say Trump's initial tariffs of 25 percent were imposed on such short notice (less than two weeks) they ended up paying tariffs for goods that were already on a ship in the ocean and that wiped out a significant amount if not all of their profits for the year. And that was with tariffs of just 25 percent, not the 100 percent the Trump regime is currently considering.
Not that any of this matters to Trump. His own family wine business based in Virginia is not subject to these tariffs but, if they were, I imagine we would not be seeing this.
Trump's tariffs of up to 100 percent are being reviewed by the office of the United States Trade Representative, Robert Lighthizer, and they could be finalized by the end of this month. Trump will be able to impose the tariffs at a time or whim of his choosing once Lighthizer signs off on them.