Small American Winemakers Face a Tough Squeeze with Trump's Tariffs
Potential consequences of tariffs on small U.S. wineries
Host LEILA FADEL introduces a dilemma for winemakers like Cole Thomas, founder of Madson Wines in Santa Cruz, California: While President Trump's new tariffs could theoretically help the American wine industry by increasing the cost of wines from abroad, smaller producers like Thomas are grappling with a murky picture. Isabella Rubin from NPR's Planet Money dives into the challenges facing these lesser-known vintners.
Rubin speaks with Thomas, who shows off an old European winemaking book in French. His passion for wine began a decade ago when he was only 24, and he's been honing his craft ever since. Annually, he produces about 40,000 bottles, a minuscule quantity compared to California's vast wine industry. His margins are thin, and the costs of making wine, from the vineyards to the bottles, are substantial.
But the real pain point for Thomas isn't just the production costs – it's the tariffs. A substantial portion of his expenses comes from imported materials, such as bottles, corks, and barrels that are sourced from abroad. For instance, 30% of his cost of goods comes from European suppliers, amounting to thousands of dollars.
With Trump's tariffs potentially increasing these costs – the 10% tariff on corks, for example, may escalate after the 90-day pause on higher tariffs – Thomas wonders if he'll have access to the essential materials he needs. One option is to switch to screw caps, which are seen as a cheaper alternative by some consumers. However, Thomas worries that this move could harm his brand perception and sales.
Another issue is the barrels. French oak barrels, prized for their delicate flavor profile, could potentially double in price due to tariffs, and American oak barrels, primarily used for bourbon aging, might not deliver the same taste profile. Thomas is also reliant on inexpensive bottles from Mexico, but with tariffs currently at 145% on Chinese imports, he may also have trouble sourcing bottles without significant increases in cost.
Moreover, the wholesalers who distribute Thomas' wine to restaurants and wine shops across the country may be impacted by tariffs as well. Their businesses often rely on importing wine, and if their ability to import is curtailed, Thomas' sales could suffer. Ultimately, Thomas is concerned about the financial well-being of his wholesale partners, deeply interconnected with his business, and uncertainty hangs over both their futures.
With accounting challenges that are both complex and tedious, Thomas and many other small winemakers find themselves at a crossroads. While tariffs could provide a glimmer of competitive advantage in a market flooded with imports, the increased costs and potential disruption to supply chains could spell trouble for many. Small winemakers like Thomas must adapt quickly and strategically to navigate these unfamiliar economic waters.
- Isabella Rubin's investigation reveals that small winemakers like Cole Thomas are struggling with the rising costs of imported materials due to President Trump's tariffs, with 30% of his cost of goods coming from European suppliers.
- As a result, Thomas wonders if he'll have access to essential materials such as French oak barrels, which could potentially double in price due to tariffs, and inexpensive bottles from Mexico, where tariffs are currently at 145% on Chinese imports.
- Additionally, the wholesalers who distribute Thomas' wine to restaurants and wine shops across the country may be affected by tariffs as their businesses often rely on importing wines, potentially leading to a decrease in Thomas' sales.
- With businesses deeply interconnected, Thomas is concerned about the financial well-being of his wholesale partners and the potential impact on both their and his future. This overarching uncertainty, along with the complex and tedious accounting challenges, leaves small winemakers like Thomas at a crossroads, needing to adapt quickly and strategically to navigate these unfamiliar economic waters.
