- A new trade deal imposing 15% tariffs on EU imports to the U.S. currently excludes the wine and spirits industry.
- Spirits stocks reversed early gains Monday as uncertainty around their tariff exposure seeped in.
- For wine and spirits, provenance is key, and many producers are unable to shift their production elsewhere.
As industry groups demand a sector-specific carve-out, European wine and spirit producers are taking their absence from the recently negotiated U.S.-EU trade agreement with care.
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Ursula von der Leyen, president of the European Commission, stated on Sunday that there was no decision pertaining to the wine and spirits industry in a framework agreement that imposed 15% tariffs on EU goods imported to the United States. She also stated that an agreement for the industry would be reviewed in the upcoming weeks.
Since provenance is crucial for wine and spirits, many businesses find it nearly impossible to shift production. In the meanwhile, the business, which has been under pressure due to declining consumer spending and changing consumption patterns, would benefit greatly from an industry-wide reprieve.
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Stocks of spiritsEarly on Monday, Pernod Ricard, Remy Cointreau, Diageo, and David Campariticked somewhat higher on expectations of a carve-out, but uncertainty set in and reduced gains.
After Heineken reported better-than-expected first-half results but indicated a softening of U.S. consumer mood, breweries, who are normally less affected by tariffs due to their localized production, traded lower.
The wine business in Europe is represented by the Comit Europ en des Entreprises Vins (CEEV), which demanded that the industry be listed among the final products covered by a proposed zero-for-zero tariff system.
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In a statement released on Sunday, CEEV President Marzia Varvaglione said, “[We] are watching with great anticipation the outcome of the upcoming negotiations regarding the list of products that will be included under the 0-for-0 tariff arrangement, among them some agricultural products.”
“We truly believe the trade of wine is of great benefit for both EU and U.S. companies,” she stated.
A bilateral zero tariff rate has been agreed upon for a number of strategic products under the new U.S.-EU trade agreement, such as “all aircraft and component parts, certain chemicals, certain generics [drugs], semiconductor equipment.” Meanwhile, discussions about other exclusions are still in progress.
Chris Swonger, the president and CEO of the Distilled Spirits Council in the United States, expressed a similar optimism about an industry-wide respite.
“We are optimistic that in the days ahead this positive meeting and agreement will lead to a return to zero-for-zero tariffs for U.S. and EU spirits products,” Swonger stated in a statement.
According to Eurostat figures, alcohol will be one of the EU’s top exports to the United States, worth approximately 9 billion euros ($10.5 billion) in 2024. According to figures from the Distilled alcohol Council, the United States exported 1.2 billion dollars’ worth of alcohol to the 27-nation EU in 2024.
Due to a post-Covid recession that has depressed spending and trade tensions, European spirits producers have reported poor sales for multiple straight quarters.
Even as businesses prepare mitigating measures like price increases, Verushka Shetty, an equities analyst at Morningstar, predicted that uncertainty around tariffs will continue to burden beverage manufacturers in the foreseeable future.
“We expect a negative impact on margins across our spirits coverage, however we expect the impact to be limited with pricing actions,” he added in an email.
In the meantime, CEEV predicted that any attempt to impose tariffs would compel wine producers in Europe to raise their prices and would even “eject” certain EU businesses from the U.S. market completely.
CEEV reports that during President Donald Trump’s 90-day tariff truce, the United States levied 10% broad-based tariffs on EU imports, which resulted in a roughly 12% decrease in wine producers’ turnover.
“While producers may absorb part of the increase to lessen the impact on consumers, this approach is not always feasible or effective,” CEEV Secretary General Dr. Ignacio Sanchez Recarte in an email to CNBC stated.
Individual producers, such as Yiannis Paraskevopoulos, co-founder of Greece’s Gaia Wines, also expressed similar worries.
“The logic suggests that there will be a negative impact, since I don’t really know any consumers Europeans or Americans that would welcome a raise to the price,” Paraskevopoulos wrote in an email.
Others, such as the champagne company Moet & Chandon, which is owned by LVMH, stated that they were choosing to handle tariffs pragmatically until further information became available.
“We maintain our agility. “We have been doing that for 280 years,” Sibylle Scherer, president and CEO of Moet & Chandon, told Charlotte Reed of CNBC.
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