A pair of proposed tariffs which would double the cost of imported European wine could devastate the Charleston area restaurant industry, members of the local wine community say.
The Trump administration in October imposed a 25 percent tariff on certain gourmet goods and luxury items, including most German Rieslings and French Beaujolais, in retaliation for the European Union’s financial support of Airbus, Boeing’s primary competitor. The Office of the United States Trade Representative last month recommended raising stakes in the trade dispute, which also involves a digital services tax enacted by France, by imposing a 100 percent tariff on all wine and spirits produced within the European Union.
If the tariffs are approved upon the impending close of the mandatory comment period, they’re set to go into effect as early as Jan. 13.
“It’s not like that’s anything anyone is going to swallow,” says Harry Root, owner of Charleston-based distributor Grassroots Wine, pointing out that alcohol typically constitutes 40 percent of a restaurant’s sales. “For restaurants already on the edge of viability, you can just start rattling off ‘Closed. Closed. Closed.’ ”
Root is the founder of Save American Wine Jobs, a growing network of importers and distributors across the country fighting to fend off the tariffs. The group is trying to build up congressional support for its cause: U.S. Rep. Joe Cunningham, D-Charleston, and U.S. Rep. William Timmons, R-Greenville, were the first to sign on to the bipartisan effort.
“Something has to be done, and I applaud the president and USTR for stepping up to the plate to defend American workers,” Timmons said in a statement. “That said, I am not convinced that tariffs on unrelated items, like wine and other agricultural products, are the way to go. Small business owners and their families will be disproportionately affected by tariffs on these goods.”
According to Root, the consequences of a European wine tariff are likely to be even more far-reaching in Charleston, where many people beyond business owners are highly dependent on restaurant income.
“It will certainly have a big effect on servers,” he says.
One downtown Charleston restaurant owner estimates the loss of Prosecco alone would amount to a $57,167 annual revenue loss. The restaurant, which The Post and Courier isn’t identifying because of the confidential nature of sales figures, sells 2,350 glasses of Prosecco and 3,340 Prosecco cocktails every year.
Just those drinks hypothetically work out to more than $1,000 a month in server tips, on average. Assuming that loss is equally shared by a 12-person front-of-house crew, each employee would be out approximately $94, or about two-thirds of the average monthly household utility bill in Charleston.
Restaurant owners and workers stand to suffer from the surging prices of wines other than Prosecco, but Root says the iconic Italian sparkler is an important example because it’s “irreplaceable.”
“You can’t just say ‘now you should drink cheap Chilean Sauvignon Blanc,’ ” he says.
When the 25 percent tariff was implemented, Root says, “it became part of our working capital immediately. We had to come up with $40,000 unexpectedly” in order to free up wine which had already shipped. But he characterizes a 100 percent tariff as “impossible.”
If restaurants can afford to keep French, Spanish, Italian and German wines on their lists, by The Washington Post’s calculations, a glass of wine which sold for $9 before the October tariff would immediately jump to $13 under a 100 percent tariff.
Still, Root says, European winemakers generally don’t feel threatened by the tariffs because there’s a market awaiting their goods in China. “And once the allocations are gone, they’re gone forever,” he says. Root predicts the existing domestic stock of European wine would be depleted within three months.
At this point, Root’s group is pushing Congress to hold a hearing on the tariffs after it reconvenes Jan. 7, as well as encouraging other trade associations to lobby alongside them. Root suspects response to the tariff proposal has been subdued because the comment period coincided with the holidays, and because people may not appreciate how many jobs it would potentially put at risk.
In his initial letter to Cunningham, Root wrote, “The new tariffs ... would absolutely result in our company laying off employees in a very short matter of time.”