Fabrizia Spirits, founded by Phil Mastroianni, is facing a significant tariff issue amounting to $70,000. A shipment of Italian sparkling wine, ordered prior to President Trump’s tariff threats, is en route to the United States. However, before the wine can be delivered to its recipients, they may be required to pay a hefty tariff, creating financial uncertainty for the small business owners involved. The ongoing trade war has left many entrepreneurs feeling paralyzed, as tariff disputes continue to impact various aspects of their businesses.
President Trump’s threats of imposing retaliatory tariffs on European alcoholic beverages have triggered a chain of tariff escalations. This situation arose after the EU suggested higher tariffs on American whiskey in response to the US imposing a 25% tariff on steel and aluminum imports. While the EU is delaying their retaliatory tariffs for negotiation purposes, American alcohol producers are anxiously awaiting a resolution to the trade tensions.
For Fabrizia Spirits, the potential 200% tariff on European alcohol could result in a substantial financial burden, especially considering their dependence on Sicilian imports for their drinks. With the uncertainty looming, Phil Mastroianni and his team are exploring contingency plans to mitigate the impact of the tariffs, including the possibility of redirecting the shipment outside the US.
Despite the challenges posed by the tariffs, Mastroianni remains optimistic, believing that President Trump’s tariff threats may serve as a bargaining tactic. Fabrizia Spirits has also joined the “Toasts Not Tariffs” coalition to advocate against the tariffs on alcohol imposed by various governments.
The trade war has not only affected Fabrizia Spirits but has also created uncertainty for US companies exporting alcoholic beverages. The shifting landscape of international trade policies has left many in the industry contemplating the future of their businesses and hoping for a resolution that spares wine and spirits from further tariff escalations.
According to Winegrape Growers, vintners in Napa and Sonoma are facing challenges with contract renewals at local wineries once current agreements expire. “Purchasing decisions are scarce,” noted Collins. With spring approaching, growers must now decide whether to prune their vineyards or invest in a growing season without assurance of selling the grapes.
One Sonoma winery shared that it has stockpiles of wine ready for export to Canada, complete with specific packaging requirements, but due to the removal of American wine and liquor from Canadian shelves, the product remains unsold. This setback is significant for American vintners, as Canada accounts for 35% of wine exports, amounting to $435 million.
California’s renowned wine industry is grappling with various challenges, including shifting consumer preferences towards healthier options, reduced alcohol consumption among younger generations, financial constraints due to inflation, and the impact of climate change on grape cultivation. Compliance expenses for grape growers in California have surged by 64% in seven years to $1,600 per acre.
Although the tariffs may level the playing field for California wines by offsetting the subsidies in the European wine industry, they present additional obstacles for domestic wine production. The current uncertainty has led to a surge in European alcohol sales in the US, as consumers anticipate potential price increases.
In light of these developments, CEO Morten Heuing of Vivino observed a spike in sales of French and Italian wines post-tariff announcement, with concerns about consumer habits changing and the possible impact on restaurant wine lists. Wine.com founder Michael Osborn noted a shift towards imported wine sales, particularly among younger customers, raising concerns about the affordability and availability of international wines in the US.
Despite the challenges, there is optimism that consumers will gravitate towards more affordable wine options, regardless of origin. However, the prevailing issue remains the lack of certainty amid the current uncertainties, leading to a standstill in wine exports to Canada and contract negotiations with grape growers.
“Collins mentioned that the damage has already been done,” reported Lisa Eadicicco from CNN. To access more CNN news and newsletters, sign up at CNN.com.
