French wine aficionados might be in for sticker shock on some of their favorite vintages, which could bode well for American winemakers.
On Monday, the Trump administration threatened to move forward with tariffs on French goods in response to France’s new digital tax that allegedly targets American tech giants like Facebook and Google. The tariffs would apply to up to $2.4 billion of French imports, including cheese, handbags and wines, which could see tariffs as high as 100% on top of 25% tariffs applied earlier this year.
For American winemakers, like famed Northern California-based winery Silver Oak Cellars, it could present a unique opportunity to gain new customers looking for cheaper alternatives to the potentially now more expensive imports, according to CEO David Duncan.
“The vast majority of our wine is sold in the U.S., so I think there’s an opportunity for maybe new customers who appreciate the wines that are being tariffed to maybe go to California [wines] and maybe ours,” he told Yahoo Finance’s YFi PM.
That by itself would be a big boost for the likes of American operators like Silver Oak and Robert Mondavi parent company Constellation Brands (STZ) were it not for the other side of the tariff coin — the retaliatory tariffs China has been applying to American wines. China is one of the world’s fastest growing wine markets to the tune of 93% since June, according to the Wine Institute, a trade group for 1,000 California wineries and related businesses. Pending any cooling in tit-for-tat tariffs between the U.S. and China, tariffs on American wines could increase to 106% on December 15.
For winemakers caught in the crossfire of tariffs, it can be a difficult thing to plan for.
“Having the tariffs and the trade wars and that kind of thing I think affects everybody,” Duncan says. “That uncertainty always breeds decisions ... and I think it primarily impacts the consumer, ultimately.”
With less wine sold abroad, the second-generation wine CEO is quicker to note how far American wines have come to more directly challenge their French and global counterparts, even going as far as calling Oregon the new Burgundy.
“I think the potential for Oregon is huge,” Duncan says. “There’s a lot of interest from the wine business and there are excellent wines being produced and I think it’s really, honestly one of the most exciting regions in the world in terms of future potential.”
With more tariffs potentially in play against its foreign competitors that statement might only get truer and truer for American wine shoppers.