Wine, airplanes, Charleston. Chenin blanc, supersonic jets, South Carolina. Boeings and Burgundies on the Berkeley County border.
As far as leads go, this one has a lot of dots to connect. Where am I going with this?
So glad you asked. On Oct. 2, the World Trade Organization green-lit the Trump administration’s plan to place tariffs on $7.5 billion worth of products from the European Union. The trade retaliation stems from a 14 year-old trade dispute between The Boeing Co. and the European conglomerate Airbus SE.
Airplanes from Boeing’s competitor will be taxed at 10 percent to enter the U.S. market, while specialty food products, including some European wines, will face an additional 25 percent tax.
Why tax Sancerre to stop alleged aviation industry skulduggery? Prevailing wisdom seems to be that the U.S. is using these specialty food taxes to hurt European farmers, who will in turn pressure the EU to smooth over any American airplane animosity. (The WTO is considering a countersuit from the EU to levy tariffs on U.S. goods in kind; experts expect a ruling next year.)
I’m no expert on international trade policy. But this particular policy puts the Lowcountry in a unique position. North Charleston is home to the aerospace manufacturer that has long been calling for this sort of trade protection. Charleston is a top-10 shipping port by volume; the State Ports Authority told me it handled 364 container equivalents, or around 3.5 million bottles, of wine from northern European countries during the 2019 fiscal year ending in June.
Most relevant (to my job, at least), the Holy City has also become one of the country's most dynamic young wine scenes.
If it seems a shame that wine, et cetera (many other European specialty food products will also be taxed) are getting dragged into a long-simmering spat about airplanes... well, there are a lot of Charleston wine professionals who agree with you.
“I think that it sucks,” said Sarah O’Kelley, Edmund's Oast wine director and general manager of Edmund's Oast Exchange. “I think it’s not fair that we’re getting pulled into something that doesn’t really have anything to do with this industry.”
The tariffs can take effect Oct. 18, and apply to the products identified in this document from the U.S. Trade Representative, the WTO affirmed Monday morning. Wines will face a 25 percent tax if they meet the following conditions:
- From France, Spain or Germany
- Under 14 percent alcohol by volume (ABV)
Those three countries combined to export around 200,000 bottled liters of wine to the U.S. in 2018. And because the ABV of wine “shot upward” since the 1980s, “the 14 percent line now cuts through the heart of most table wines,” wrote Eric Asimov, the New York Times’ longtime wine critic.
It also comprises a big chunk of business for some of Charleston’s importers, distributors, and retailers. “Ninety-five percent of what we work with is going to fall into that category,” said Harry Root of Grassroots Wine, an influential Southeastern distributor with offices in Birmingham and North Charleston. “The percentage of our French and German portfolios is closer to 100 percent.”
“Certainly my Burgundies” will be affected, echoed Frederick Corriher, an importer on James Island. His Oysterman Muscadet, at 12 percent ABV, will also come in for the higher tariff. “I only import French wines,” he told me.
(That Champagne was exempted, Corriher added, was "very fortunate going into the holidays.")
Because the tariffs will also restrict other European specialty foods like Italian cheeses, olive oil and Scotch whisky, Charleston retailers such as goat.sheep.cow are bracing for a “double whammy,” co-owner Trudi Wagner, told me. She estimated two-thirds of the Church Street shop’s cheese inventory came from the tariff zones, as well as much of the wine served by the glass at goat.sheep.cow North, its Meeting Street cafe space.
“This has certainly led to a lot of sleepless nights for us,” Wagner said.
Barring any last-minute deals, the tariffs will take effect at the end of the week. But before you fling down your phone and make haste for the nearest bottle shop, a few caveats.
First of all, on wine at least, you and I won’t see any dramatic price hikes for a while. (Products with shorter shelf lives, like cheese, less so, to Wagner's chagrin.)
“Thankfully, most of the big European pre-sales are already here,” O’Kelley said. “They literally all just landed.” Tariffs are assessed when the product hits U.S. ports, so they won’t affect wine already on U.S. soil.
Jon-David Headrick, a Tennessee-based importer who counts Charleston as an "incredible" wine market that "greatly outperforms" others of comparable size, told me he doesn’t expect drinkers to feel the effects of the tariff until early 2020. But: “starting in January, or even starting mid-December when the rosés and the dry whites start releasing, you're really gonna see it," he predicted.
Second, the dollar is fairly strong against the euro at the moment (as I write this column, one euro is worth about $1.10). If the tariffs aren’t quickly resolved, they could bring higher prices... ones that would resemble a less-favorable exchange rate. Seasoned Charleston restaurateurs like Rick Rubel, wine director for Belmond Charleston Place and a sommelier at Charleston Grill, have been here before. “I've often seen 1.3 or 1.26 or 1.28 exchange rates, which is going to be very close to what that tax is going to bring to us,” he said. “So, essentially, we've seen something very similar.”
And third, if and when you do start feeling the tax, it may not be the full brunt. “I don’t think your $10 bottle will be $13,” Justin Coleman, proprietor of Monarch Wine Merchants, told me. (Coleman’s math isn’t wonky; everyone told me that the full brunt could work out to be several points higher than the 25 percent tariff because the costs would compound as the wine moved from importer to distributor to retailer.)
He was hopeful that everyone along the supply chain that delivered wine to his downtown Charleston store would step up and absorb some of the price hike.
Will everyone on the supply chain do that? It’s a nice thought, since the winemaker typically receives the least value for his/her wine of anyone in the supply chain. Headrick told me most of the distributors he’d spoken with expressed willingness to take some of the hit — if not for solidarity with the growers, than to protect the gains they’ve made in markets like Charleston’s. “When a brand is established in a market and then it goes away for a while, people forget about it,” he said.
For importers and distributors who have toiled to turn Charleston into a top-rate wine market, giving up ground is even less palatable than a bottom-shelf bulk blend. To “simply pass these dramatically increased (costs) on to consumers would be disastrous for what I do,” said Headrick.
It could also be disastrous for the winemakers on the other side of the equation — something Corriher and the others are intent to avoid: “I’m not going to let my growers that I represent suffer by willy-nilly raising my prices 25 percent and letting the volume go down.”
(Rubel is dubious that such cost-sharing will occur across the board, though. “It sounds a little bit too 'kumbaya' for me,” he said.)
It would be a political choice for Lowcountry wine professionals to share the burden with their overseas partners. But what you drink, where, when and with whom, has always been freighted (ahem) with political significance, whether you like it or not. A bottle of chenin blanc is never "just" a bottle of chenin blanc.
From airplanes to Charleston's wine community, the dots connect. The politics of drinking will get 25 percent more obvious to Lowcountry wine lovers. For the time being, at least.