In Lodi, California, the iconic wine industry is keeping a vigilant eye on the intensifying trade tensions between the United States and Europe. These tensions add to the existing challenges the industry faces, such as dwindling global wine consumption, increased operational costs, and unpredictable weather patterns.
A significant concern within the industry is the potential rise in prices of wine-making supplies and the potential decline of U.S. importers of European wines. The Wine Institute, representing California wineries, warns that tariffs could have far-reaching effects on the wine sector, impacting farmers, vintners, distributors, retailers, and the vast network of workers in the wine supply chain.
Despite these concerns, there are those in California’s winegrape growing community who find a glimmer of hope amidst the uncertainty. Craig Ledbetter, a veteran winegrape grower of four decades, notes the high costs of farming in California compared to wine-producing regions like Chile and Australia, coupled with the lack of government support seen in Europe. As a partner at the family-run Vino Farms in Lodi, Ledbetter has experienced the impact of low demand firsthand, having left significant quantities of grapes unharvested and diversifying into pistachios. However, he sees potential in President Donald Trump’s proposed 200% tariff on European wines, considering it a preliminary step rather than a final measure. He holds onto the hope that such tariffs could ultimately level the playing field.
While some in the industry maintain a positive outlook, numerous wine experts and advocates express concerns. They predict that tariffs could negatively impact U.S. importers and elevate costs for essential supplies like wine barrels and glass bottles. They also caution that retaliatory measures from Europe could lead to increased tariffs on U.S. wine exports.
The U.S. wine industry is already dealing with challenges such as a 25% import tax in Canada, a response to tariffs the Trump administration placed on various Canadian products. This tax has already compelled Canada, a major destination for California wine exports, to reduce its imports of U.S. wines. The Wine Institute cites that California, responsible for 80% of U.S. wine production, shipped approximately 24 million cases of wine abroad in 2023.
The industry is grappling with other pressures, including shifting consumer preferences, rising farming costs, exposure to wildfire smoke, and drought conditions. According to the Wine Institute, wine consumption per person in the U.S. hit its lowest point in over a decade in 2023. Although most California wine is consumed domestically, its exports remain a crucial agricultural product, valued at $1.3 billion in 2022.
Generally, economists view tariffs skeptically as they are often seen as an ineffective governmental revenue tool. Stuart Spencer, who leads the Lodi Winegrape Commission, highlighted the complications tariffs posed during a recent European promotional tour. Wine’s unique vulnerability to trade wars stems from its marketing, closely tied to geographic origin, making it non-substitutable.
However, some industry stakeholders believe that in the short term, higher European wine tariffs might make California wines more competitively priced, possibly opening new avenues. Rob McMillan of the Silicon Valley Bank anticipates this could be an opportunity for local wines. Meanwhile, Keith Saarloos, a vineyard owner in Santa Barbara, remains resilient, focusing on direct consumer sales without relying on international exports. He likens the current challenges to offroading, pointing out the need for optimism amid industry upheaval.
Saarloos encourages consumers to explore new wines and sees potential for growth despite the difficulties. “I have to remain optimistic,” he concludes, reflecting a sentiment shared by many hoping for favorable outcomes despite an uncertain road ahead.
