Trump's plan could backfire

California grapegrowers are facing a challenging situation with the proposed 200 percent tariff on European wines. While some support the tariff as a way to address trade imbalances, it could have unintended consequences. Many California wine grapes were left unharvested last year, and the tariff might encourage U.S. wineries to import more foreign bulk wine. This is due to a tax loophole known as "duty drawback," which allows producers to get refunds on duties, including tariffs, if they export wine. This policy has led to significant government spending on subsidizing imported bulk wine.

Stuart Spencer, executive director of the Lodi Winegrape Commission, noted that when California grape prices rise, bulk wine imports drive them back down. Over the past 20 years, California has lost about 10 percent of its market share, largely due to these imports. The proposed tariffs come from the White House, but the duty drawback was passed by Congress in 2004. Fixing this issue may require congressional action.

John Duarte, a former Republican Congressman and grapevine nursery owner, appreciates efforts to address trade imbalances but warns that the duty drawback could make the tariffs counterproductive. Companies can claim credits for wines exported up to five years ago, allowing them to import cheap foreign wine at a lower cost than California grapes. This gives them a competitive edge over wines made solely in California.

California growers face additional challenges due to structural trade imbalances. While media often focuses on luxury wines, the real issue lies with low-end supermarket wines priced at $10 and under, which make up a significant portion of U.S. wine sales. European countries provide government support to their grapegrowers, including subsidies for replanting and marketing, which are not available to U.S. growers.

Natalie Collins, president of the California Association of Winegrape Growers, highlighted the competitive disadvantage faced by U.S. growers. California's strict regulations add to farming costs, making it difficult to compete with cheaper foreign wines. A study from Cal Poly San Luis Obispo showed that regulatory costs for lettuce in California have increased significantly, and similar regulations apply to grapes.

California's minimum wage is higher than France's, adding to production costs. Jeff Bitter, president of Allied Grape Growers, emphasized the state's commitment to environmental and social justice, but noted the frustration when consumers choose cheaper foreign wines. Duarte mentioned that despite efforts to promote sustainability, there is little loyalty when cheaper options are available.

In France, growers protest when cheaper foreign wines appear on shelves, but U.S. growers often remain silent. Many are hesitant to speak out due to fear of backlash, as the wine industry generally opposes tariffs. Bitter expressed the need for a level playing field and reducing disadvantages faced by American growers. While Trump's rhetoric may be exaggerated, the underlying issues of trade policy and support for American businesses are valid concerns.