Tariffs on European Wines Strain U.S. Wine Industry and Distributors

The Trump administration’s tariffs on European wines have created unexpected challenges for U.S. winemakers and distributors. The tariffs, which were introduced as part of a broader effort to protect American industries from foreign competition, have disrupted the complex supply chains that support the domestic wine business. The wine industry in the United States operates under a unique set of rules, many of which date back to Prohibition. Most wine is sold through a three-tier system: producers and importers sell to distributors, who then supply shops and restaurants. This system means that winemakers are generally not allowed to sell directly to consumers or retailers, except in limited cases such as tasting rooms or in states with more flexible laws.

Distributors play a crucial role in this system, acting as the main sales force for both domestic and imported wines. According to Ben Aneff, managing partner at Tribeca Wine Merchants and president of the U.S. Wine Trade Alliance, distributors maintain relationships with restaurants and retailers, helping to determine what wines reach consumers. European wines, especially those from France and Italy, are important for these distributors because they typically offer higher profit margins than American wines. This higher profitability helps sustain the distribution networks that U.S. winemakers rely on to get their products to market.

Harry Root, co-founder of Grassroots Wine, a distributor operating in South Carolina and Alabama, explained that European wines make up about 65 percent of his company’s sales but account for 75 percent of its gross profit. These margins are essential for keeping the business viable given the low margins on domestic wines. When tariffs were imposed on European Union wines—currently at 15 percent—distributors lost much of this margin. The tariffs must be paid upfront before the wine leaves the port, putting additional strain on operating budgets.

The intended purpose of these tariffs is twofold: to generate revenue for the federal government and to protect domestic producers from foreign competition. However, as economists have pointed out, if tariffs are high enough to reduce imports significantly, they also reduce government revenue because fewer goods are being taxed. If imports remain high despite the tariffs, then domestic producers are not being protected effectively. In practice, tariffs often end up distorting markets and increasing costs for both businesses and consumers.

The uncertainty surrounding tariff policy has added another layer of difficulty for winemakers. The Trump administration’s approach to tariffs has been unpredictable, with targets changing frequently. For an industry where it can take six to eight years or more from planting vines to bottling wine, this unpredictability is especially damaging. Katie Lazar, general manager at Cain Vineyard & Winery in Napa Valley, described the current situation as an existential threat for producers and farmers.

Some industry experts suggest that relaxing Prohibition-era regulations could help by allowing more direct sales from producers to consumers or retailers. However, changing this system would require a major overhaul of how wine is distributed in the United States—a costly and complicated process that would not provide immediate relief.

Another challenge is consumer behavior. Higher prices on European wines do not necessarily drive customers toward American wines; instead, many switch to less expensive imports from other regions such as South America. This means that U.S. winemakers do not benefit directly from reduced competition with Europe.

Many in the industry believe that wine tariffs are being used as leverage in broader trade disputes with Europe over issues like energy and automobiles rather than out of concern for American winemakers. The U.S. wine industry is relatively small compared to other sectors and lacks significant political influence.

As negotiations between U.S. and European officials continue without resolution, winemakers and distributors face ongoing uncertainty about their future costs and access to key products. For now, the tariffs remain in place, leaving many in the industry concerned about their ability to operate profitably under these new conditions.