Fight between U.S., EU leads to tariff squeezing local wine businesses

Miami Valley News

Red wine being poured into a stem glass at the table. Wine distributors are facing a 25-percent tariff on wines from four European countries because of a dispute between the EU and U.S. over aircraft makers Boeing and Airbus. Stock photo

DAYTON, Ohio (WDTN) – What does a clash between two of the world’s largest aircraft manufacturers – Airbus and Boeing – have to do with area wine companies? Enough to put some out of business according to Eric Faber of Cutting Edge Selection.

Faber’s company is a leading wine distributor in Ohio and Kentucky. Since October his Cincinnati-based business has taken hits from the COVID-19 outbreak and a tariff placed on some European wines by the U.S. government. The tariffs are the result of a battle between the U.S., European Union and the World Trade Organization over subsidies to aircraft makers Boening and Airbus.

As a result, the U.S. put tariffs on several European products in October, including wine from France, Germany, Spain and Britain. Faber fears 50 to 70 percent of the wine distributors and wholesalers in the U.S. could be forced out of business between the tariffs and the COVID-19 outbreak.

“(The U.S. government) put the 25-percent tariff on in October,” Faber told WDTN.com. “No one knew this was coming. They then later threatened a 100-percent tariff.”

Faber said a 100-percent tariff would destroy 100 distributors around the country. Cutting Edge Selection’s customers are mostly restaurants, most of which are just now opening back down after being under lockdown orders since March because of the COVID-19 outbreak. Faber said through the shutdown, Cutting Edge’s revenue was down 30 percent with it growing to 45 percent at its peak. He said they’ve fortunately been able to keep every one of their employees.

Mif Frank, who owns Arrow Wine and Spirits, said retailers haven’t felt the affect of the tariffs yet because the wine bought after October is still making its way through the supply chain. He also said retailers have seen an increase in revenue because of the bar and restaurant closings from March through May. But he’s worried about distributors in the U.S. and producers overseas, many of which are small businesses with small profit margins.

“We’ve been very fortunate, but on the flip side of that, the restaurants and bars have been suffering,” Frank said. “In my honest opinion, the ones who will take the biggest effect will be wholesalers and distributors. Them and the producers, we need to make sure they are doing all right.”

Faber said the wine businesses are victims in a fight in the World Trade Organization. The WTO ruled both Boeing and Airbus had received illegal subsidies or tax breaks from their home countries (Airbus is located in France). The WTO ruled in 2019 that the U.S. was wronged due to the subsidies, so it put in place the tariff on wine from four countries. Now the wait is on the WTO to rule on Boeing and its case.

“The WTO hasn’t ruled against Boeing and the U.S. yet,” Faber said. “Many beleive the tariffs are a pre-emptive strike to keep the WTO from ruling against Boeing.”

Shortly after the tariff was put into law, Faber said distributors from several states went to Washington D.C. to lobby on the behalf of American wine busineeses.

“The part of this thing that’s so frustrating is they are putting a lot of American small business in the way of two of the largest businesses in the world,” Faber said. “They threatned to do this before with sparkling wine and a proposed French digital service tax but they’ve postponed it until the end of this year, but that potential tariff on sparkling wine looms over us as well.

“The difficult thing, the tariffs are hard enough to deal with and created enough problems in our industry from small retailers to restaurants that want great wine lists. None of us have anything to do with Airbus and Boeing.”

WDTN.com reached out to Senators Sherrod Brown and Rob Portman, and Congressmen Mike Turner and Warren Davidson. As of 4 p.m. on Monday, the office of Senator Brown sent the following statement to WDTN.com:

Sen. Brown believes it’s important that the U.S. always stand up for American workers, even when that sometimes means standing up to our allies. When trading partners don’t play by the rules, tariffs are a temporary tool to enforce trade laws and level the playing field for all American workers. Sen. Brown believes that the European Union must do the right thing and abide by international trade law so that American workers can compete on a level playing field once again, including Ohio workers and small businesses in southwest Ohio.

The executive order for the wine tariff can be read at the website for the Federal Register.

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