“One in every two bottles of wine is consumed outside its country of origin," says John Barker, International Vine and Wine Organization (OIV) Director General Tariffs, trade, and the economy are top of mind for many these days. The wine industry is no exception. While consumers worry over increased prices of groceries and household goods, industry professionals brace for ongoing uncertainty in the global wine market. “Trade is the lifeblood of the wine industry,” says John Barker, International Vine and Wine Organization (OIV) Director General, in a recent 2024 state of the industry address. “One in every two bottles of wine is consumed outside its country of origin.” Reflect on that a moment…one in every two bottles. How does an industry that relies so heavily on global trade mitigate the impact of uncertainty and disruption? The answer depends on who’s being asked. However, as Eric Asimov wrote in the New York Times, “Pretty much everybody in the American wine world stands to lose something.” Where Do Tariffs Currently Stand? Since early February, President Donald J. Trump has announced, applied, withdrawn, and threatened so many different tariff scenarios it’s hard to keep up. The 200 percent tariff threat has not come to fruition. The proposed 20 percent on European Union wine, 30 percent on South African wine, and 17 percent on Israeli wine are currently on 90 day pause. A general 10 percent tariff remains in effect on all imports from every country, including countries that import more goods than they export. Wine is included in this 10 percent. Additionally, Canada and Mexico are facing up to 25 percent tariffs on about half their U.S. exports. Prompting nine of Canada’s ten provinces to remove American wine from stores and restaurants. Canada is the U.S. wine industry’s biggest export market, at the tune of about $1 billion annually. While China is not a large export market for American wineries, it has been growing steadily—reaching $50 million in 2024. Additionally, many products American wineries use, such as glass, are produced in China. Uncertainty looms as to how long the 145 percent tariffs on Chinese imports will last. At time of publication, President Donald J. Trump indicates these tariffs will “come down substantially,” but the timeframe remains unclear. How Tariffs Impact Alcohol “It was hard to imaging tariffs taking affect at 200 percent,” says Travis Perez, Southern Glazer’s Signature Fine Wine Division Account Representative. “If 25 percent, that would still be detrimental, but can possibly be spread out, with importers and distributors taking a little so the full amount isn’t on the consumer. It’s so hard to plan because we don’t know where the number will actually fall.” The wine (alcohol) industry operates in what is known as a three-tier system. Tier One: Winery who produces the alcoholic beverage (also distilleries, breweries). The producers are legally restricted from selling their product directly to retailers or restaurants. Importers, who are responsible for bringing foreign wine into the U.S., also falls in this tier. Tier Two: Distributors purchase foreign wine from importers and domestic wine from wineries. Distributors handle logistics of storing and transporting wine, as well as marketing and promotion with retailers and restaurants. Tier Three: Retailers, such as wine shops, bars, restaurants, liquor stores, and grocery stores. Outside of purchasing wine directly from a winery, this is the only tier allowing consumers to purchase wine (beer, spirits, etc.) When Perez speaks of spreading out tariffs so the full amount is not passed on to consumers, this three-tier system is what he is speaking of. The fear he shares is small wineries, importers, distributors, and retailers cannot absorb any of the tariff because their profit margins are too thin. “This could lead to consolidation; employees will be let go,” he says. “This will also impact domestic producers who rely on distribution to get their wines to retailers and restaurants because the remaining portfolios will expand so that they too will go unsold.” This is key: Tariffs also negatively impact American wineries because they too rely on distribution to reach retailers, and ultimately consumers. Consolidation means more wines for few distributors. Smaller wineries tend to lose in this scenario. “Wine is non-fungible. You cannot replicate specific communes of Burgundy that were formed over millennia by planetary evolution. The more a wine reflects terroir, the harder it is to replicate.” Travis Perez, Southern Glazer’s Signature Fine Wine Division Account Representative Tariffs Hurt Small Business and Community Nicole Nowlin, Managing Director of Able Brown Augusta, is trying not to be reactive. She is storing what she can, but with a small footprint, the restaurant is unable to house a large wine inventory. She shares Perez’s concerns about the impacts of tariffs on small businesses. “Many importers, producers, retailers and restaurants are small businesses,” says Nowlin. “Many I know are still recovering from the first round of tariffs in 2018, impacts of Covid, and rising costs in shipping and wine. The margins are so small and the ripple effects are huge. It can take years to recover. Subtext: It Sucks.” Her concern is small importers will have to forgo once a year allocations due to tariff inflated pricing. This risks the importer losing that wine allocation in the future. She fears producers will start selling more to China and other countries, impact many U.S. employees from dock workers, truck drivers, farmers, janitorial staff. “There are a lot of faces we aren’t thinking about who will be impacted. Not to be bleak, but small producers, importers, distributors, retailers, and restaurants will not exist. Is this what we want? We will become an industry of strip malls filled with big chains.” These professionals see wine as communal, connecting over stories and history. “The more diverse a wine list the more interesting it is to customers,” says Nowlin. “Wine is hospitality. In the restaurant we interact with our customers over wine, sharing stories of producers or vintage. We can’t move everyone to cocktails and maintain the same connection.” Perez agrees, adding, “Wine is non-fungible. You cannot replicate specific communes of Burgundy that were formed over millennia by planetary evolution. The more a wine reflects terroir, the harder it is to replicate.” Planning For Tariff Uncertainty Because Dallas’s Quarter Acre focuses on Chef Toby Archibald’s world travels and New Zealand roots, its wine list largely highlights Australian and New Zealand wine. In the past, this has allowed Jacob Fergus, Assistant General Manager and Beverage Director of Quarter Acres Restaurant, to be less concerned about tariffs. “When I get a question about tariffs, in the context of dining room service, I usually turn that as a positive for our program which, usually, it is,” he says. “New Zealand and Australia are not normally targeted in the same group as European Union wine producers so in previous tariff scenarios it has only improve the value proposition for these wines.” Ten percent tariffs are easier for the three-tier system to absorb, but the ongoing uncertainty poses challenges for planning. “As for business planning, this is the most unpredictable part. Restaurants, with the exception of major national chains, are completely at the mercy of the distribution and supply steps before us with basically no control over the pricing,” he says. “Wines can change prices without notice, sometimes even to the surprise of the distribution sales reps! The best we can do is react quickly as soon as we see any changes start to happen.” “Wine is hospitality. In the restaurant we interact with our customers over wine, sharing stories of producers or vintage. We can’t move everyone to cocktails and maintain the same connection," says Nicole Nowlin, Managing Director of Able Brown Augusta According to the OIV 2024 state of the wine industry address, production and consumption has slumped to its 1961 levels. Tariff uncertainty does not aid this decline. “Trade is the lifeblood of the wine industry. It’s a cultural exchange that is highly diverse and highly connected. It depends on stability, which is more important today than ever,” says OIV’s Barker. Terri Burney, founder and owner of Winetastic Wine Bar in Dallas, recalls the 2019 tariffs and spoke to her suppliers in November 2024 to prepare for this round. She says many put wine on ships immediately after the election to be prepared for tariffs. “As a small business, I can switch up my inventory quickly if need be. Shoot from the hip, as they say,” she says. “For the next several months all is good. If this continues for years, that’s another story.” More From Forbes Follow me on Twitter or LinkedIn. Check out my website or some of my other work. Editorial StandardsForbes Accolades