Confronting the T-Word
I’m based in the United States, as you probably know, and the word on everyone’s lips is “tariffs.” We finally know what the Orange Man decided to do. It’s a relief that the long wait is over and that the 200% tariff that was threatened was—for now—just a threat, but you don’t have to be an economist to know this isn’t good for the wine scene here in the States.
The new 20% tariffs on European wines are bad news not only because some importers will be forced out of business, but also because costs will go up as the remainder of the supply chain pass their costs on to customers. And as much as I’d love to say wine is essential, higher prices on everything from energy to groceries mean fewer people will be ordering bottles that already sat in a semi-premium or premium category before tariffs—like many Galician wines, for example. Wine lovers will be met with fewer choices, higher prices, and a more homogenous wine market.
The U.S. is the biggest export market for Galician wines, absorbing about 30% of Galicia’s wine exports each year. Rías Baixas alone is responsible for over €20 million in exports. So it’s logical that they might be a bit worried. Or not?
The average ex-cellar price of a bottle of wine from Rías Baixas is around €6—meaning it’s not impossible that it could hit the shelf at $19.99. With a 20% tariff, the price could jump to €7.20 ex-cellar—making it roughly $25 on the shelf, a different price point for many consumers. But a spokesperson from Rías Baixas projected confidence, telling La Voz de Galicia that “at our price point, the tariff is manageable for consumers."
Similarly, Martín Códax, which is distributed through Gallo, one of the largest and most influential wine producers and distributors in the U.S, told La Voz that “these tariffs don’t put [us] at a disadvantage because they apply equally to all premium European wines. Our Albariños will maintain their position in the U.S. market.”
But for other Galician DOs, the tariffs might exacerbate problems that already exist. Ribeira Sacra’s wine exports are still a tiny part of its overall sales, hovering at just under 6% of the total. But within that small percentage, one in every three bottles exported goes to the United States. If importers lower the quantity and frequency of their shipments, winemakers are worried that any unsold wine could flood other, already-saturated markets, driving prices down even further. “The problem is that there’s a lot of uncertainty, and you can feel it in every market," said Fernando González of Adega Algueira.
The Galician Ministry of Rural Affairs said that they will be pushing for market diversification and focusing on quality. The large Galician contingent at Prowein in Germany was part of this strategy, as Galician wineries look for markets beyond the U.S. to absorb whatever losses tariffs might bring.
At the end of the day, tariffs hurt Americans more than they hurt Europeans. They push Galicia’s wineries to look elsewhere, which is bad news for us here in the States. The U.S. has been a top market for Galicia, but if tariffs make the wines too expensive to be viable, wineries will shift their focus to selling in other markets—like the couple hundred billion thirsty consumers in the Orange Man’s mortal enemy, China, for example. That would mean not just fewer Galician wines on American shelves and wine lists, but also less access to wines with smaller production.
And uniquely for Spain / Galicia, losing ground in the U.S. market isn’t just a short-term problem. Spain is never anyone’s first choice on a wine list as it is, and it doesn’t have the decades of market exposure that France, Italy, or even Germany have. I know Galician wineries who have spent years building relationships with importers who have helped introduce their wines to American consumers. I’m sure those importers will ask their suppliers to eat part of the cost, but if it’s not feasible and those partnerships fizzle, it’ll be difficult to rebuild them later on when their adoring customers have moved on to the next shiny toy. Meanwhile, American restaurants and retailers who pour and sell imported wine will fill the gaps with what’s available and at the right price. Nothing against Martín Códax—I love their wines—but part of the fun of being a wine drinker is discovery. Do we really want the Galician wine market to turn into a monopoly with the same two choices on every shelf and wine list?
Instead of protecting American businesses, these tariffs are going to drive away our international partners, raise prices across the board, and make it harder to get the wines you know and love. In the end, everyone loses.