As the European wine industry faces the prospect of substantial tariffs from the United States, concerns are rising about the potential impact on both sides of the Atlantic.

The US market for European wines is valued at nearly €5 billion, and a disruption could have far-reaching implications for European producers, who already report significant losses.

With American consumers drinking over 4.3 billion bottles annually—30% to 40% of which come from imports—the potential for tariffs exceeding 200% on EU wines has raised alarm among European wine-makers.

The immediate effect is already visible, as importers are suspending shipments, leading to an estimated loss of €100 million per week for EU wine companies.

This impending trade conflict emerged following a threat from former US President Donald Trump in retaliation for proposed duties on American bourbon.

The US Wine Trade Alliance swiftly condemned the impending tariffs while instructing its members to halt all shipments from the European Union, citing worries about possible exceptions for goods already in transit.

In California, which produces approximately 80% of American wine, there are mixed feelings about the tariffs.

Local winemakers see potential for increased sales of domestic wines if European bottles become prohibitively expensive.

Natalie Collins, President of the California Association of Winegrape Growers, noted the tariffs could present both challenges and opportunities.

Yet, she emphasized that the issues of declining wine consumption and oversupply are deeper-rooted problems that require long-term solutions.

Rob McMillan, who leads Silicon Valley Bank's wine division, highlighted the unusual situation in which vineyards in prestigious regions like Sonoma and Napa have struggled with unsold inventory.

He noted a generational shift, with younger consumers showing decreased interest in wine, which coincides with trends towards other beverages including cocktails and increased cannabis use.

Data indicates that California growers have removed over 26,000 hectares of vines since 2022, with projections of needing to eliminate an additional 20,000 hectares to stabilize supply.

The European wine industry faces a similar challenge, with some governments offering financial incentives to reduce vine acreage.

While the potential tariffs could help clear excess inventory and discourage practices that allow producers to blend foreign grapes into domestic wines, the California industry is already experiencing the fallout from deteriorating relations with Canada, which has imposed a boycott on US wines.

This has raised concerns that American jobs linked to the wine distribution industry, particularly importers, may also be adversely affected.

European wine producers mirror these anxieties.

The US is a significant market for Italian wine exports, accounting for around 25% of the total, with a value of €2 billion.

Many of these wines fall within the affordable category, suggesting that an increase in prices due to tariffs could lead to a reduction in consumption among American buyers.

To mitigate the risk of escalation in the trade tensions, European winemakers are actively lobbying against retaliatory tariffs, emphasizing their desire to exclude wine from the dispute.

During this ongoing negotiation, Italian representatives express hope for a possible resolution that could protect the interests of their wine sector, while highlighting the risk of potential losses if tariffs are enacted.

The situation remains fluid as stakeholders navigate the complexities of trade relationships between the EU and the US.