On the edge of Burgenland, Austria, Werner Michlits Jr. is busy harvesting grapes. That’s a welcome distraction from the waiting game EU-U.S. trade negotiations have put him and other winemakers in, wondering if they’ll lose their most lucrative market.
Winemakers in Europe and their import and distribution partners in the U.S. are facing twin crises: a 15 percent tariff on European wine entering the U.S. and a declining dollar. Many American importers stocked up on wine ahead of an Aug. 1 tariff deadline, leaving them cash-strapped for the next few months and placing winemakers in a holding pattern while trade negotiations continue.
Michlits, who runs the Meinklang farm and winery with his wife and parents, exports more than a third of its wine to the U.S. Some importers have asked if he can lower prices to offset tariffs.
“But it’s impossible. We are already at our maximum,” he said. “It’s a little bit sad, because we have so much invested in this relationship. In the end, it’s the consumers in America that have to pay, or they will drink other wines.”
European exporters have long benefited from tariff-free access to the American market on most alcohol and had hoped they would win an exemption in the trade deal struck this summer.
A 15 percent rate isn’t as bad as it could have been. President Donald Trump at one point threatened 200 percent.
“From one day to the next, our exports stopped for an entire month,” said Ignacio Sánchez Recarte, secretary-general of European Committee of Wine Companies, or CEEV, which represents EU wine companies.
But it’s still significant. CEEV estimates that the wine industry could lose €800 million to €1 billion over the next year. It’s not only that Europeans will stop sending wines, but producers will also earn less on the wines they are sending.
Lamberto Frescobaldi, one of the largest wine producers in Italy, said the average price of Italian wine being sent to the U.S. has dropped 10 percent over the past three months.
“It kills me to think we would be less involved in the U.S. For many Italians, the U.S. has been the country of home, opportunity. It is a very, very difficult thing that we are not a good guest any longer there,” said the 30th-generation Florentine winemaker.
‘A fragile and scary time’
Across the ocean, it’s killing their counterparts, too.
“A wine that a restaurant bought in November of last year is going to be 35 percent more expensive this year,” said Ben Aneff, president of the U.S. Wine Trade Alliance, citing tariffs and the plunging dollar. “It’s hard to overstate the problem we expect that to start causing.”
European winemakers exported more than €4.88 billion worth of wine in 2024 to the U.S., their largest destination market. In parallel, for every dollar generated by wine exporters, American distribution and hospitality sectors earn $4.50, the European industry estimates.
Importers and distributors have been hit hardest so far. Aneff said that European wines account for 75 percent of the industry’s profits. Most distributors have halted all hiring, and some have started layoffs.
Harry Root, owner of Grassroots Wine in Charleston, South Carolina, focuses on small, family-owned wineries around the world, with about 60 percent of them in Europe. At this time last year his business was growing 13 percent year-on-year. This year, sales are flat.
“And the only reason it’s flat is because we’ve had competitors going out of business. It’s a fragile and scary time,” Root said.
His strategy for the rest of the year is to be more conservative with his European buying. But like most importers, he bought as much as possible before tariffs took effect.
Bad for Europe, bad for the U.S.
This causes other issues though, particularly for American wineries.
“Subsequently, we have had to slow purchase from American producers because we have so much capital tied up in tariffs and EU wine,” said Root.
The way wine sales work in the U.S. goes back to the Prohibition era a century ago, when most states implemented what’s known as the three-tier system. Wineries sell to distributors, who sell to retailers and restaurateurs, who sell to consumers.
Even if a retailer really wants a certain domestic wine, or has a good relationship with a winemaker, they cannot go out and purchase that wine on their own.
“No other product in the country is sold this way,” said Aneff. “Distributors, who sometimes make up to 65 percent of revenue from imported wine, when they get a huge tariff bill, they buy less, including less American wine. Last time this happened, we had U.S. wineries who lost their distribution in states like New York because distributors had financial issues caused by tariffs.”
That’s why American wine groups including Napa Valley Vintners, The Wine Institute, Wine America, and the National Association of Wine Retailers have sent a joint letter to Trump asking him to reconsider his European tariffs. They warned that the 15 percent tariff rate could reduce American alcohol sales by nearly $2 billion and put 25,000 U.S. jobs at risk.
“We import about $4.5 billion of European wine a year, resulting in $23 billion worth of sales in the U.S.,” said Aneff. “That surplus goes to the 6,000 importers and distributors who have employees, to independent retailers, to hundreds of thousands of restaurants and their employees. There is no other imported product that would have economics like that.”
The wine world is in trouble not only because of tariffs. Climate change and extreme weather events and declining consumption are threatening the industry in both Europe and the U.S. But those are long-term problems, while this is immediate.
What consumers want
The next few months will be telling as consumers grapple with higher prices. Wine is not fungible: the whole point of terroir is that wine is distinct, and of a place. A Pinot Noir from Burgundy is not the same as a Pinot Noir from Oregon. Both can be fantastic, but they’re different.
“The flat reality is that when someone wants a burgundy from France, that’s what they want. If you go to the grocery store and want strawberries and they say ‘Here’s tomatoes,’ that’s not the same thing,” said Aneff.
He’s had to raise prices on effectively everything at Tribeca Wine Merchants, his wine shop in New York City, to offset tariffs — even on U.S. wines.
But not everyone sees doomsday ahead. Peter Eizel, wine buyer at Martha’s Vineyard, a busy wine shop in Grand Rapids, Michigan, said he thinks consumers are willing to pay a couple dollars more for European wines.
He stocked up earlier this year, but there are some bottles you can only buy in certain seasons, like Beaujolais Nouveau. He ordered his cases a few weeks ago and said wines that he would normally sell for $10 will go for $11.99. He expects them to still fly off the shelves.
“If I said to someone, ‘Well the price of X, Y, Z wine is gonna go up $2 or $5, but I have this other wine from this country over here and it’s quality-wise about the same, and I can get it to you $4 cheaper,’ my customers will say, ‘I don’t care that it’s cheaper, it tastes different,’” he said.
The organizers of Vinitaly, the world’s largest wine show, are betting he’s right. Vinitaly has run in Verona for 58 years, but this October will stage its fair in Chicago for the second time. Adolfo Rebughini, general manager of Veronafiere, which organizes Vinitaly, expects about 1,600 U.S. buyers in Chicago this year — a strong number despite the situation.
“We’re going full steam ahead with the U.S. because it is such a critical market for Italian wine producers,” Rebughini said.
Italian wine exports to the U.S. account for roughly €2 billion per year, according to Rebughini. Veronafiere estimates the Italian wine sector could lose €317 million per year, but if the dollar keeps weakening that could reach €450 million.
Certain wines are more at risk. Sixty percent of all Moscato d’Asti is exported to the U.S., 48 percent of all Pinot Grigio and 46 percent of all Chianti.
Some European wineries are looking outside the U.S., particularly to Canada, Mexico and Brazil. They welcome the EU’s deal with the South American Mercosur bloc and are excited about a prospective free-trade accord with India, where wine is currently taxed at 150 percent nationally, plus state taxes. But any benefit from those deals could be years away.
“We try to compensate with other markets, but there is no way that any other trade alternative that the EU could have could compensate for the losses of the U.S.” said Recarte of CEEV. “We understand that the Commission has been supporting us strongly, asking wines and spirits to have a special status in the second package.”
Trade Commissioner Maroš Šefčovič told European lawmakers last week that he was working to expand exemptions on the 15 percent U.S. tariffs to include wine and spirits, signaling that no progress has yet been made.
For now, winemakers are living in limbo.
“We all still hope this disappears as fast as it appeared,” said Michlits, pausing the harvest for a rain break. “We all want tariffs to go away.”
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