Dive Brief:

• The White House is placing 25% tariffs on high alcohol wine from France and Germany as part of a long-running trade dispute over aircraft parts, according to a document filed by the Office of the U.S. Trade Representative.
• Starting in October 2019, wines that were 14% alcohol or less were hit with a 25% tariff. Those above 14% were exempt. Starting Jan. 12, that tariff will be applied to those above 14% as well. Premium cognacs costing $38 or more a litter will also get slapped with the new import duties, the USTR said. 
• The new tariffs, which come in the waning days of the Trump administration, have been widely criticized by organizations including the Distilled Spirits Council and the U.S. Wine Trade Alliance. They urged the incoming Biden administration to act quickly upon taking office. "We need to convince President-elect Biden that tariff relief should be a major priority of his first few weeks in office, and this is no small task," Ben Aneff, president of the U.S. Wine Trade Alliance, said in a statement.

Dive Insight:

While European wine and spirit products would be directly hit by the tariffs, U.S. groups are quick to point out the changes would also disrupt and negatively impact the U.S. hospitality industry as well as producers, wholesalers and importers of alcohol. With restaurants and other establishments closed or seeing business severely curtailed because of the pandemic, the alcohol industry said cutting off a key source of business through higher tariffs would further harm its members.

"We continue to urge the EU and the US to negotiate an agreement that will end the excessive and unwarranted tariffs on distilled spirits across the Atlantic without any further delay," the Distilled Spirits Council said.

The Wall Street Journal noted the U.S. imposed 25% tariffs on wine from France, Spain, Germany and the U.K. in October 2019 in retaliation for subsidies they made to European aircraft manufacturer Airbus, arguing they hurt U.S.-based Boeing. With the levy in place, higher alcohol wines from Europe saw a spike in sales, the paper noted.

The Trump administration has frequently turned to tariffs when it comes to trade policy, and the escalation in the long-running trade dispute with Europe over subsidies to airplane manufacturers is the latest evidence that it remains a key tool.

Still, the upcoming tariff changes provide evidence the battle is further encroaching into products used by everyday consumers — coming at a particularly unwelcome time for many shoppers and business owners. The 2019 tariffs placed by the U.S. on a host of European items also included cheese, butter and olives. The EU retaliated in November with levies on U.S. products — including nuts, seeds, spirits, sauces, soups and other goods — worth $4 billion.

Trade groups representing wine and spirits remain hopeful President-elect Biden will remove the tariffs, though it is uncertain how quickly or even if he will act. The Hill reported Biden said he would not immediately remove Trump's more controversial tariffs tied to China, but reporters were uncertain whether he would act on those with the EU. At the same time, Biden will have a lot on his plate in the early days of his presidency, so action, even if he does support it, could take time.

The impending tariffs would most likely be beneficial to U.S. producers who could see increased demand for their products if businesses and consumers aren't willing to pay more for the imported offerings. But in a statement, the Comité Européen des Entreprises Vins and the U.S.-based Wine Institute called for further open access to each other's markets "by fully, immediately and simultaneously eliminating all tariffs on wine."

"The longstanding EU-US wine trade alliance is important for the health of our sector and should be preserved and supported," the groups said. "Our wine trade relationship is the largest in the world and a key driver for EU and US wine export growth. ... On both sides of the Atlantic, we are aware of the importance and benefits of maintaining this bilateral partnership."