American Wine Drinkers Paid 68% More Than Tariff Revenue During EU Trade Dispute, Study Finds

Between 2019 and 2021, the United States imposed a 25% tariff on certain European wines as part of the trade dispute with the European Union over subsidies to Airbus and Boeing. The tariffs targeted still wines with an alcohol content of 14% or less, in bottles of two liters or less, from France, Germany, Spain, and the United Kingdom. The measure was introduced under the Trump administration and was intended to pressure European exporters. However, a recent study by the American Association of Wine Economists (AAWE) shows that American wine consumers ended up bearing most of the cost.

The research, conducted by economists Aaron Flaaen, Ali Hortaçsu, Felix Tintelnot, Nicolás Urdaneta, and Daniel Yi Xu, used confidential transaction data to track how the tariff affected prices at each stage of the supply chain. The study followed the journey from European producers to American importers, distributors, and finally retailers such as Wine.com, Binny’s, Flatiron Wines & Spirits, and Astor Wines & Spirits. The findings reveal that while the tariffs were designed to hurt European exporters, they had a greater impact on American consumers.

The U.S. wine distribution system operates on three levels: importer, distributor, and retailer. For every dollar spent on European wine at the border, this system generates $4.50 in value by the time it reaches consumers. This structure amplifies the effect of tariffs throughout the supply chain. When tariffs increased costs for importers, those costs were passed along and multiplied at each stage.

The AAWE study compared wines subject to tariffs (still wines at or below 14% alcohol) with a control group (wines above 14% alcohol and sparkling wines not subject to tariffs). Using econometric models such as event studies and difference-in-differences analysis, researchers isolated the direct effects of the tariff on prices at each stage.

European producers responded by lowering their prices by about 5.2%, absorbing roughly a quarter of the tariff’s cost. U.S. importers raised their prices to distributors by 5.4%, which reduced their own profit margins. Retail prices for consumers increased by 6.9%, but this change took about a year to fully materialize after the tariffs were imposed.

For a bottle of wine that cost $5 at the border, a $1.19 tariff led to a $1.59 increase in retail price for consumers. The study estimates that consumers paid at least 68% more than what was collected in customs revenue from the tariff itself. Importers saw their margins shrink while distributors and retailers increased theirs, indicating a redistribution of economic burden along the supply chain.

The timing of price changes also varied: import prices adjusted within three months of the tariff’s introduction, while retail prices took up to twelve months to reflect the full impact. Even after tariffs were suspended in March 2021 following negotiations between Washington and Brussels, retail prices remained elevated for some time.

Another notable finding is that many European producers engaged in “tariff engineering” to avoid extra costs. Some increased their wines’ alcohol content above 14% or introduced new labels with higher alcohol levels so their products would not be subject to tariffs. Data from U.S. label certification records showed a significant shift toward these categories immediately after tariffs were imposed, with a return to previous patterns once tariffs were lifted.

The study highlights broader implications for trade policy and inflation. The cumulative markups in long supply chains mean that even modest tariffs can have amplified effects on final consumer prices—effects that can persist even after tariffs are removed. The practice of “tariff engineering” can also distort official trade statistics by shifting product categories.

Ultimately, while European producers absorbed some of the cost and U.S. importers saw reduced profits, it was American wine enthusiasts who paid most of the bill through higher retail prices. The research suggests that similar dynamics could apply to other imported goods subject to tariffs in complex distribution systems across various industries in the United States.