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May 30, 2022 View:

Spanish vintners hope to reduce interest income to mitigate the impact of U.S. tariffs

If the olive oil industry has taken steps to circumvent U.S. tariffs, it's time for the wine industry to act as well.

Image courtesy of: Penin Guide Spain

According to an internal survey conducted by the Spanish Wine Federation (FEV), sales to North America from other EU wine producing countries have decreased by about 23% since the new tax rates came into effect. U.S. customs data collected by the Spanish Wine Market Watch (OEMV) in a recent report shows the losses are not as pronounced, falling only 10.4% from last October to August of this year.

According to a survey by the Spanish Wine Federation (FEV), since October 2019, 86% of wineries have chosen to reduce their profit margins to compensate for the new tariffs imposed by the Trump administration, but still about 5% of Spanish wine companies have had to choose to leave the U.S. market.Jos Luis Bentez, president of the FEV, explained that this situation means that wine companies have sacrificed a large part of their profits so that sales would no longer fall as a result and would continue to enter the U.S. market even if they were almost losing money.

In fact, most of the tariff (25%) has been borne by the wineries, but there is another portion of the tariff that has been borne by the distribution chain in the U.S. The large companies in the industry have profit margins that happen to be close to 25%, so the tariff now leaves them facing little to no profit.

In addition, another way to circumvent the tariff is to export wines above 14 proof to the US, as the new tariff only covers wines below 14 proof. As a result, 35 percent of wineries have chosen to switch their exports.

On the possibility of the United States withdrawing tariffs as requested by the EU, FEV said: Although the World Trade Organization (WTO) decided to intervene in the tariff issue, it is not something that can be resolved in a day. We hope that the tension can be reduced, rather than exacerbate the strife.