Louis Terminello, Esq.
Last Friday, the Trump administration announced increased tariffs on $200 billion of Chinese goods imported to the US. As expected, this morning, the Chinese government retaliated, escalating the conflict and imposing increased tariffs on $60 billion dollars of US imports to China. Apparently, the Chinese government has created four (4) categories of tariff rates on the existing value of $60 billion in goods. Those new category rates are 25%, 20%, 10% and 5%. Yesterday, the Chinese government issued a statement identifying the products by category and commensurate tariff rate increase. It has been reported that wine tariffs have increased to 10%.
As of this writing, the tariff rate imposed on spirits is unclear, but surely exports to China will be affected. The Wine Institute reported that 2018 wine exports dropped by 25% to $78.7 million, compared to 2017 sales. It has been reported that in total Chinese tariffs and taxes imposed on US wine imports have increased to nearly 80%. This new round of Chinese tariff increases may contribute to a further decrease in overall US wine exports, particularly for China.
Increased tariffs on the part of a number of US trading partners on US imports are contributing to a decrease in US Whiskey exports as well. Whiskey exports have been strong, particularly into EU countries: the Distilled Spirts Council reported that in the first half of 2018 whiskey exports grew by 28%. Once tariffs took effect, though, whiskey exports fell by 8.2% during the last quarter of 2018. Note that US whiskey manufacturers face increased tariffs not only for China, but for Mexico, Canada, EU and Turkey as well.
In addition to having an impact on US producers and exporters of wine and spirits, the tariff escalations between the US and China will also impact the price to consumers of wine and spirits bottled in the US. This is because the original round of increased US tariffs on imports from China included tariffs on glass bottles imported from China into the US. China is a large supplier of glass bottles—among other packaging items—to the industry, and the increased tariffs will likely be passed on to consumers in the form of increased prices of bottled wine and spirits.
With little sign of the trade dispute ending soon, we can expect this supply chain disruption to continue to be felt by producers—along with increased prices of grape and grain for consumers.
Greenspoon Marder’s Hospitality, Alcohol & Leisure Industry Group is ready to assist in helping businesses navigate through this new tariff scheme. Please reach out to Louis J. Terminello at
firstname.lastname@example.org or 305-789-2770.
Should you need assistance in Washington D.C. to determine the tariff status of your products, please contact Jessica Wasserman at Jessica.email@example.com or 202-669-9449.
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