A Waiting Game: Wilson Daniels Makes Preparations While Awaiting Tariff Decision

As comments on the United States Trade Representative (USTR) review of the proposed 100% tariff on European wines close, anxiety continues to build within the industry. These tariffs pose an undeniable threat both domestically and abroad. A supposed retaliation against trade disputes in the aerospace industry (among others), this price increase would be especially disastrous on the heels of a 25% tariff on Champagne and other products that went into effect this past October.

While Wilson Daniels worked successfully with producers to absorb the impact of that first round, this second round is anticipated to be much more difficult. Wilson Daniels employees from every department are preparing for a number of scenarios, as well as taking this opportunity to learn everything they can about these proposed economic conditions in order to inform future decisions.

“We are doing everything in our power to avoid any hiccups in the ordering and/or inventory of our wines,” says Senior Vice President Shannon Coursey. “There is certainly a sense of general anxiety in the wine business around the current tariffs, which has been greatly amplified with the potential increases.”

While on a surface level, the tariff would double the prices of European wines for the consumer, and may have been developed specifically to increase consumption of domestic wines, the actual effect of these fees would prove much more complicated, and frequently drastic.

“Some companies will simply not be able to afford to bring certain wines into the U.S. any longer,” says Coursey.

These consequences would shake the relationships between American importers and European wine producers to their cores. Larger wine houses would likely prioritize other markets, and if the tariffs were eventually lifted, American importers would face the burden of restoring connections forged over years (if not decades). Wilson Daniels is especially conscious of this possibility, as we work with many smaller family-owned wineries that would feel the impact of these tariffs more acutely.

“Each year we build on the work we did the prior year for each producer,” says Coursey. “Losing that momentum could be especially difficult for small wineries who rely heavily on the U.S. market.”

While many suffer from budget paralysis while facing uncertainty about 2020 investments, Wilson Daniels has elected to take precautions to ensure our producers remain protected for as long as possible.

“We currently have inventory from nearly all of our European producers to cover at least half of our 2020 depletion goals,” she adds.

Should the tariffs remain in effect for longer, it will become increasingly difficult to mitigate their effects. Coursey maintains that a top priority is providing our national and wholesale teams with confidence to convey our producers. If consumers shift demand to winemaking regions outside of Europe, Wilson Daniels’ strong domestic and international portfolios will keep up. In the case of New Zealand producer Frenzy, for example, Wilson Daniels has already increased vintage reserves for 2020, independent of the tariff possibility, as the brand has been growing exponentially.

Amidst the uncertainty that the possibility of these tariffs inspires, Wilson Daniels remains steadfast in our longtime goal to support great winemakers from around the world, and will continue to take all possible steps to protect our producers, employees, and industry partners as the decision approaches.

Wilson Daniels, January 14, 2020

January 14, 2020

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