"You have to pay for the privilege of accessing our market." The worst seems to have been avoided, but the shock will still be severe for French wines and spirits. While Donald Trump no longer mentions the 200% additional customs duties brandished, which would have closed the American market, the 20% increase announced for all European products strongly threatens the export of French wines and spirits coming into force at the beginning of April.

In wine there is wisdom, in beer there is freedom, in water there are bacteria" said Benjamin Franklin. For his self-proclaimed "Liberation Day" on April 2, US President Donald Trump announced reciprocal tariffs that should make such an oenophile founding father turn in his grave. Eagerly awaited by wine and spirits exporters, the announcements of the President of the United States come on April 2 from the Rose Garden of the White House where he signed an executive order acknowledging from the beginning of April "half customs duties" to "nations that have treated us badly" commercially, as "we are nice guys" these would be "fair reciprocal tariffs".

Brandishing a sign aligning the tariffs imposed on American goods according to his administration's calculations ("including exchange rate manipulations and trade barriers" including VAT), the American president announced reciprocal tariffs of 20% for European Union products (based on a calculation of 39% tariffs) that would come into force on April 9 (according to the White House). Among the other global vineyards, South Africa would be targeted by 30% tariffs, Argentina, Australia, Chile and New Zealand by 10% tariffs, Globally, all countries will have a minimum of 10% additional customs duties for access to the US market (effective April 5). In any case, "you have to pay for the privilege of accessing our market," said Donald Trump during an hour of rather confused speeches (ranging from the rooster to the donkey, from the conflict between Russia and Ukraine to the stakes of the US Senate).

The worst avoided?

If they are confirmed for wines and spirits specifically, these additional duties are in line with the taxes recently discussed in Washington. Above all, to the relief of the sector, they are far from the 200% customs duties announced by Donald Trump on March 13 as retaliatory measures for the European project to impose 50% tariffs on bourbons presented on March 12 in the dispute over steel and aluminum. A red rag that particularly drew Donald Trump's attention to wines and spirits. Taken hostage while they are not involved in the case, the entire sector regrets, which has led the European Union to temporize and postpone its retaliatory measures.

In concrete terms, in the leading importing market for French wines (€2.3 billion in 2024, +8% compared to 2023, for 19.5 million cases, +11%), additional duties of 20% on French wines and spirits could generate €800 million in losses, according to a press release from the Federation of Wine and Spirits Exporters (FEVS). In a press release also mentioning "a total cost estimated at several hundred million euros for the French sector" of 20% taxes, Jérôme Bauer, the president of the National Confederation of Producers of Wines and Wine Spirits with Controlled Appellations of Origin (CNAOC), points out that "some companies may be able to adapt by cutting back on their margin and find an agreement with their importer: But it is still necessary to hold on over the long term. This was done during the punitive taxes in the context of the Airbus/Boeing conflict (by 25%, targeting part of French wines and spirits from October 2019 to March 2021) and which contributed to halving shipments at the time (-€600 million/year).

This time affecting all French wines and spirits, the new Trump taxes target a set of operators (including its suppliers and service providers) who are already in difficulty, with crises accumulating since 2019: climatic, economic... and geopolitical issues. "For eaux-de-vie (Cognac and Armagnac), it's a disaster of unimaginable proportions. In addition to the conflict with China, these taxes will put our sector in very great difficulty, with a risk of chain closures in Charentes in particular," says Anthony Brun, president of the General Union of Winegrowers of the AOC Cognac (UGVC). "This tariff confrontation is only making losers, both in Europe and in the United States. Moreover, our American counterparts, with whom we have been working for decades, are also bringing this message to the American authorities," says Gabriel Picard, President of the FEVS.

U.S. Market Fundamentals

For the European Committee of Wine Companies (CEEV), this is "a hard blow for the wine trade between the European Union and the United States" (4.88 billion euros of European wines shipped). As it stands, "the American wine market is fundamental for the economic viability of the European Union's wine sector," says Marzia Varvaglione, the president of the CEEV, for whom "there is no other wine market that can compensate for the loss of the American market."

Request for negotiations

This is pushing the European industry to ask for rapid diplomatic action from Brussels to negotiate the lifting of all taxes. "These tariffs will remain in place until President Trump determines that the threat posed by the trade deficit and underlying non-reciprocal treatment is met, resolved or mitigated," the White House said on April 2. "There is still time to negotiate. We strongly encourage the European Commission to open fair and peaceful negotiations to enable us to obtain a reduction in this tax in order to maintain trade flows, which are more necessary than ever in the context we are experiencing," pleaded Jérôme Bauer. The Alsace winemaker confirmed that "in the short term, we will not be able to compensate for trade deficits by opening up to substitute markets."

Proposing a "positive agenda" to maintain fruitful transatlantic trade, the FEVS is campaigning for the abolition of all customs duties on wines, as is the case for spirits. "We have proposed to the European Commission a Reciprocal And Fair Trade Agreement on Wines and Spirits," says Gabriel Picard, so that "wines participate in the construction of a positive trade relationship between the United States and the European Union."

Order cancellations or blocks

After months of threats (latent since the 2024 election campaign, formalized since last February), Donald Trump's announcement is still unclear, but at least has the virtue of putting an end to the uncertainties that are already weighing heavily on activity. There are already shipments suspended, as American operators do not want to see containers ordered arrive before the taxes that would be imposed at a rate that could make the pallets unsellable. "For several weeks now, we have been seeing cancellations or blockages of orders from exporters says Jean-Marie Garde, president of the Fédération des Grands Vins de Bordeaux (FGVB), Bordeaux shipping 30 million bottles and €435 million to the American market, its main export destination.

Fake news?

While the American retail sector is alerting Washington to the harmful effects on employment and activity of the slightest tax increase, the Trump administration refutes it outright. "Despite the rhetoric of politicians and the media, studies have repeatedly shown that tariffs are an effective tool for achieving economic and strategic objectives, just as they did during President Trump's first term," the White House replied today in a prodomo plea on the beneficial effects of tariffs. adding that "for the first time in decades, the United States will experience fair trade as President Donald J. Trump announces tariffs to level the playing field for American workers and businesses." A vision defended by Donald Trump, indicating that all the criticisms expressed in the coming days on his strategy will be disqualified as they come from people who have been wrong about international trade in the past: an opportunity to talk about fake news again for the American president.

All the hope of French operators is now that the negotiations between the European Union and the United States will be fruitful to lift these taxes and allow the sharing of good bottles between nations. Because "wine is proof that God loves us and likes to see us happy" said Benjamin Franklin.

Source:Vitisphere