New York wine industry is thriving but not immune to damage from new tariffs on American wine exports
The New York wine industry is going strong. With jobs, sales and tax revenue the industry now generates more than $13.8 billion, not to mention what wine and grapes do for upstate tourism and agriculture. In Albany, lawmakers recently stamped their approval with the 2019 budget backing programs and research for wine and grapes that includes $1.023 million for the New York Wine & Grape Foundation.
But the industry doesn’t operate in a vacuum. What’s happening beyond Albany and the Bristol Hills affects producers, sellers and consumers — everyone from big international players like Fortune 500 company Constellation Brands Inc., to the various mom-and-pop wineries of the Finger Lakes.
On April 2, China lodged new tariffs on 128 U.S. products — goods that amount to $3 billion — and those goods include wine. The move is in retaliation for President Donald Trump’s decision to slap tariffs on about $50 billion worth in Chinese goods, triggering a potentially damaging trade confrontation with Beijing.
“Wine is once again an innocent victim caught in the crossfire of a major trade dispute, this time between the United States and China,” stated Jim Trezise in the most recent publication of Wine America, the national organization of American wineries. Trezise, former president of New York Wine & Grape Foundation, now leads the national organization serving the interests of wineries in all 50 states through grassroots lobbying to benefit the entire industry.
The new tariff on American wines of 15 percent “could have a devastating effect on the American wine industry for years to come,” stated Trezise, who heads the Washington D.C. organization but still calls the Finger Lakes home. The new tariff could “significantly raise the prices of our wines at a time when major competitors like Australia and Chile are benefiting from lower tariffs due to their own free trade agreements,” said Trezise.
“These tariffs put our products at a price disadvantage and we urge swift resolution of this issue before long-term disruptions are felt,” said Robert P. “Bobby” Koch, president and CEO of Wine Institute in a statement. He cited the report prepared by the U.S. Department of Agriculture showing the new tariff will increase the total tariff and tax paid on a bottle of U.S. wine imported into China from 48.2 percent to 67.7 percent.
Chile, Georgia and New Zealand wines enter China tariff-free and only pay the 27 percent combined tax rate. Australian wines will be tariff-free starting in 2019.
While California is affected most directly and severely — representing roughly 90 percent of total U.S. wine production and about 97 percent of American wine exports — “the potential ripple effect of their lost sales would extend across the country,” said Trezise.
The tariffs come at a time when China is poised to become the world's second-largest wine market (after the U.S.) and the value of California wine exports to mainland China has jumped 450 percent in the past 10 years to over $75 million in 2017. That makes China the number five export market for the U.S., and the U.S. is China's sixth-largest wine importing nation.
“Big bucks and lots of wine are at stake,” Trezise said.
“The tariffs could quickly reverse all that progress, which would mean there would be a huge supply of California wine that would need to find a new home,” said Trezise, naming places that wine would go — to all 50 states with wine regions of their own, including New York.
New York state has 450 wine producers and 11,684 acres of vineyard, according to NYWGF. The state ranks third in the nation after California and Washington state for wine production, according to Wine America. The Finger Lakes holds the candle as one of the state’s major wine regions and is famous for its specialty sparkling, Riesling, Pinot Noir, Ice Wines and a slew of varieties that like the land around the lakes. In 2016, the Finger Lakes was dubbed America’s Best Wine Region, ranked by sommeliers as number one for its “must-hit” wineries.
At the New York Wine & Grape Foundation based in Canandaigua, Trezise’s successor, Sam Filler, urges those in the wine-and-grape business to join WineAmerica as the trade organization working in Washington D.C. on behalf of the industry over tariff trouble and other challenges.
Trezise said one of the concerns to be addressed due to the tariffs is “an influx of surplus California wines on store shelves and restaurant lists (that) could easily push the local wines out.”
Pam Raymor runs Raymor Estate Cellars in Bloomfield with her husband, winemaker Herb Raymor. Pam said their winery relies mostly on selling at festivals and events and incurs expenses associated with being featured at the various venues. While small wineries like Raymor aren't players in the larger market, she said they too will feel the effects.
“With tariffs, cheaper wines are going to be more plentiful, " Pam Raymor said. That will add to the competition that is already heavy due to cheaper wines out there imported from Australia and other areas, she said.
“It is all about the pie, about how much of the pie you will get,” Pam said.
Filler noted the 15 percent tariff will be on top of the existing 14 percent duty that is placed on standard U.S. wine, creating a 29 percent total tariff.
“The United States exported nearly $80,000,000 in wine to mainland China in 2017. It was the 5th largest export market for U.S. wine and 97 percent of all U.S. wine exports are from California,” stated Filler. “Fortunately, we have an excellent team at WineAmerica that will be working tirelessly to mitigate the negative impacts of the tariffs by being a voice for the industry on Capitol Hill."