A few weeks ago, the submission period ended for comments to USTR-2019-0003-2518, a proposal from the US Government to levy duties up to 100% percent on a whole host of EU products, including food and wine. The proposed tariffs made national news, and tens of thousands of comments were submitted on the USTR’s website - protests from importers, retailers, distributors, sommeliers, restauranteurs from the wine industry perspective alone. It looked momentarily like the outcry had worked -- on January 20, President Macron of France tweeted that he had reached an agreement with President Trump to avoid tariff escalation. Wine nerds rejoiced all over, thinking the battle was won.
Unfortunately, the tariffs remain a pretty serious threat. The confusion over the tariff issue lies in the fact that the US Government has proposed tariffs on European wines to settle two different scores: one in retaliation for France’s proposed 3% tax on tech giants like Google, and one (referenced by the USTR and green-lit by the WTO in 2019) as reparations against the EU for providing illegal subsidies to Airbus years ago. Macron’s tweet was in reference to the tech tax, which France did not end up implementing. It remains unclear if and when tariffs to settle the Airbus score will go into effect, what countries or products would be affected, or how large the tariffs would be.
So, in sum, nothing has been settled. And it’s even scarier now, because the USTR is currently off the radar of the national media, and who knows what the US Government may do when it thinks no one is watching.
It’s a harrowing moment for people in the wine industry, especially people like me who represent niche or specialty European products. In November, I brought in a container of wine with customs duties and taxes that cost me $2550, or about $3.47/case. If there were a 100% increase in duties, I would be paying $5100 for that same amount of wine. Consider this in the context of all of the other fees associated with wine import and distribution. We start with the price I pay the winery for the bottle. Once the winery has everything packed and ready to go, I have to pay for transportation from the winery to Budapest, then loading it into a container, and transferring that container from Budapest to a distant port city, usually Hamburg or Rotterdam. Then there’s a 10-15 day ocean voyage, then customs duties, then transportation to my warehouse. At the warehouse, they charge to bring the product in, store it, take the product out, and, finally, to deliver it. So we’re talking about something like 11 different steps where costs are levied on a bottle of wine, all before it even reaches the store. Moreover, this is assuming that everything goes exactly according to plan, which it rarely does. I’ve had wine damaged during transit, held up at the port city, held up at customs, and wine that simply didn’t taste “right” upon arrival.
Let’s say a small importer like me brings in 10 containers a year. If customs duties per container go from $2550 to $5100 each time, then we’re talking about an extra $25,500/year. That’s $25,500/year levied by the US Government on a Hungarian wine trader to settle an old score related to a US-EU dispute. (That dispute, by the way, was first filed with the WTO in 2004, the same year Hungary joined the EU.) $25,500 is not insignificant when added to the delicate scales of running a micro business in 2020. And no consumer value was gained from the $25,500 - we didn’t get more wine, a fancier product, or a safer world. It’s just the new cost of being a small business owner in America. Moreover, it was recently revealed that wine sales are at an all-time low: people want cocktails, kombucha, craft beer, hard spirits, seltzer and White Claw. I don’t imagine the customer gladly paying an exorbitant new tax for a bottle of wine. And that is scary, because I am not sure where else this proposed $25,500 would come from.
I think one misconception that underlines the wine tariff proposition is that a European winemaker is eager (if not desperate) to sell their wines to the United States. This is probably tied to the outdated idea that the United States is this most sophisticated, wealthy, super powerful market. Following this logic, the European winemakers should absorb some of the tariff cost on their end, for the privilege of doing business with us. Of course this is delusional. In Hungary, I have to fight to get allocations of most of the wines we import. The best wine from anywhere, including Hungary, is produced in super small quantities, and there’s always a high demand for them. We try to import the most special stuff in Hungary - unfiltered reds, aged whites, rare grapes, orange wines, even the elusive Hungarian pet-nat! People in Hungary want these wines too, and they’re willing to pay the same amount we do. I’m sure that if Palinkerie didn’t exist, our winemakers could sell their wine (and with great success) to restaurants and stores in Hungary - and whatever remains could be easily sold elsewhere in Europe or abroad. So it’s not like the European winemaker must accept some reduction in their price, just to afford doing business with the United States. They can very easily find another buyer, willing and happy to pay whatever price the wine deserves. The United States isn’t nearly as special of a market as it thinks it is.
The second misconception is that wine is somehow this interchangeable, easy-to-replace thing. The Congressmen in the January hearing seemed to be confused as to why a domestic wine couldn’t simply stand in for a European import. But wine isn’t a typical thing. People spend up to $20,000 for a single bottle, perfectly reasonable professionals throw away stable careers for a chance to work in wine, and the most difficult test in the world, they say, is one that tests your sommelier skills. Wine is this unbelievably fascinating thing for people. Part of that is due to the fact that every single bottle of wine is different. This diversity depends on a multitude of factors, such as how it’s made, where it’s from, the special nuances of that vintage, the vineyard and region, the cellar, the winemaking culture of the place, and even the producer’s ethos and quirks.
In a tiny area of northeastern Hungary, rolling hills rife with exposed minerals like basalt, rhyolite, bentonite, sandstone, limestone, and quartz are separated by three rivers that converge around the village of Tokaj. Grapes grow natively on these hills, and these grapes are late-ripening and high in acid. For hundreds of years, people here have been making a special style of sweet wine from these grapes called Tokaji Aszú. It was the first wine style in the world that was officially codified into law, and it was also the first dessert wine on record. People still make this wine, along with newer, just-as-interesting styles, in the region. When you buy a Tokaji wine from a shop in the United States, you’re experiencing it all -- the unique volcanic soils and the humidity of the region, the ancient cellars with their hundred-year-old mold growths that ferment and protect the wine, and all of that history and culture surrounding it. You can’t simply recreate this elsewhere and call it the same thing.
Any bottle you open expresses what type of place it came from, whether it was a warm or a cool vintage, and how the winemaker picked the grapes. You can know how they fermented the wine, and how much (or how little) they opted for things like barrel, selected yeast, or residual sugar. All of this makes up the microculture around every single bottle of wine. The wines with the most special microcultures are the wines that we are dying to drink -- the ones we start businesses for, the ones that change people’s experiences and the one’s collectors fight for.
These wines with distinct microcultures are hard to find. Several times per year, I board a wheezing old train to the Hungarian countryside in hopes of finding some incredible wines. The winemakers and I taste in damp cellars and ride up uneven roads to old vineyards, and we eat heavily sauced dinners that someone cooked at home. I have to speak Hungarian, which is really hard, by the way. But I power through, hoping I sound coherent. I have my Hungarian notebook right next to my tasting notebook, the latest of about 7, where I jot down notes of everything I’ve tasted and retasted since 2013. Then I return to Budapest, review my notes, taste more wines I’ve never heard of in the city’s many wine bars, and try to figure out how I could sell some of my favorite finds.
A hefty tariff would seriously burden the small businesses that expose our market to these special wine microcultures. With higher costs and thinner margins, we’d have less room to experiment. We would need to be really careful in deciding what to import. Financially, it makes sense to focus on easy-to-sell, mass-produced wines. It would be a lot harder to justify bringing people things they didn’t ask for. But the most special wines, produced in small quantities, are necessarily different than what we normally drink. They push the limits of consumer taste and thwart our expectations. They are made by hand and express a natural variation that cannot be mass produced. With the price of business on the rise, we have less incentive to take chances on these types of rare or unique products.
I get asked all the time about how I started my business. It’s a boring question to answer straight-on, and I’m never sure how in-depth I’m expected to explain. I used to think that people were literally asking me to recite the steps to becoming a wine importer. Research, taste, put in an order, arrange the logistics? But now I think what actually intrigues people is what got me to the point where I believed I could start my own business. What precipitated the leap from faithful American corporate drone to pursuing my own interests through self-employment? What made me think such a thing was possible? And was I right, is it possible? Eyes widen when I started to answer that yes, it’s possible, I am supporting myself with a business that I started as a sort of dream career. Not to say that it’s perfect - I don’t have your insurance, your job security or your benefits. But I am free to live it how I want. Their question isn’t about me or even about wine, really. It’s everything to do with the widely-held, little-exercised dream of living on one’s own terms. A lot of people want to work for themselves, but I guess very few actually do it. This dream is so fundamental to our collective American psyche, and yet it seems unattainable.
In my mind, then, the tariffs would not only harm the small wine businesses already in action and fighting to make it work. They also have the power to kill every small business idea kicking around in a notebook somewhere, dreamt up during someone’s lunch break, those nuggets of inspiration and creativity that bring us new products, fresh experiences, and better ways of living. Great wines will go elsewhere, and new markets around the world will rejoice at the microculture of a bottle that we never got to taste. The American consumer will miss out, and small American business plans will have to wait, their sketches drawn by people like me, wanting to make life their own.
