Tariffs, Labor, and Freezes
As if the wine industry isn’t already facing enough challenges, several more big ones are now official in the form of potential tariffs, immigration enforcement, and the freezing of funds and functions in DC. While all may be subject to legal challenge and delay, even the uncertainty can wreak havoc on an industry that relies on certainty, consistency, and continuity.
Tariffs: On Saturday, President Trump officially announced 25% tariffs on Canadian and Mexican imports, and 10% on Chinese goods. Not surprisingly, those countries announced retaliatory tariffs, including on alcohol products. Mexico is a major supplier of beer (think Corona and Modelo, owned by Constellation Brands), and Canada is the largest export market for U.S. wines. In most cases, provincial governments control alcohol marketing so have significant power; British Columbia actually said it would target wines from “red states”, which would be good news for CA, OR, and WA, but bad news for TX. Even those states which do not export could be hurt, since brands that have been exported will now likely flood the U.S. market, taking shelf space and lowering prices. This is an ever-changing situation, injecting uncertainty into the distribution system. For now, the tariffs on Canada and Mexico have been paused for 30 days in exchange for stronger border enforcement by both countries.
Labor: The ICE (Immigration and Customs Enforcement) crackdowns and deportations of undocumented immigrants initially focused on urban areas but it is likely to have major consequences for the wine industry. Not only are skilled migrant workers vital in the vineyards, but also in the hospitality sector like restaurants and hotels which host wine country tourists and in other ways support the consumption of wine.
Freezes: The abrupt freezing of all government spending was a major shock to the economy even though some aspects have been amended in response to questions and concerns from nearly everywhere. On the international level, the U.S. exited the World Health Organization and has suspended virtually all foreign aid around the world.
Retirement Incentives: The Trump Administration has repeatedly encouraged federal workers to accept a retirement plan as a way to reduce the size of government, and has in other ways been pursuing that goal.
Regulations: For every new regulation, 10 must be scrapped. That’s the guidance for helping to reduce what is considered regulatory overreach on the federal level. This could essentially eliminate the recent announcements by TTB relative to ingredient labeling.
Normally, the government moves very slowly, but these are not normal times. What you just read is the situation as of today, which will change tomorrow. The only way to keep up with what is happening in DC is to become a member of WineAmerica so you receive the weekly newsletters from Michael Kaiser, Executive Vice President and Director of Government Affairs (a.k.a., our lobbyist).