Running a small business is notoriously unpredictable, but it is doubtful Orenda and Peter Hale thought a trade dispute over aircraft would be the biggest threat to the future of Drifters Wife, their celebrated Portland restaurant, or Maine & Loire, its companion wine store.
But now the Hales, like other owners of small wine and specialty food stores, importers and distributors across the country, are staring down the barrel of new U.S. tariffs on European wine, cheese, olives and other products that could double prices and potentially drive them out of business.
“Literally, our wine shop would cease to exist if this happens, within a matter of months. Our restaurant would not be the restaurant we want it to be – its heart would be ripped out,” Peter Hale said in an interview. “That goes for a number of our peers in the community.”
The proposed sanctions are the newest round in a years-long trade dispute over subsidies European Union countries provide to aircraft manufacturer Airbus. Last year, the World Trade Organization ruled EU assistance disadvantaged the U.S. aerospace industry by $7.5 billion, and it authorized tariffs.
That prompted the U.S. to slap many cheese and wine imports from a few European countries with a 25 percent tariff, or import tax, typically paid by importers. When the WTO last month ruled the EU still did not comply with its rules, the U.S. Trade Representative put out an expanded list of products subject to a tariff of up to 100 percent.
The revised list includes wool sweaters, whiskey, cosmetics, leather goods, knives and other high-end items.
The U.S. also has proposed up to 100 percent tariffs on French imports including sparkling wine and cheese in retaliation for that country’s imposition of a 3 percent tax on internet companies such as Google, Amazon and Facebook.
Retailers, importers and growers cooperated to insulate U.S. consumers from the earlier tariff, but there is no way to avoid massive price hikes if the new maximum is applied, Peter Hale said. Like many others, he believes tariffs aimed to punish Europe will only hurt American consumers and small businesses.
Peter and Orenda Hale, and their daughter Poppy, pose Tuesday in their Portland wine shop, Maine & Loire. They fear that a new round of tariffs on European wine will force them to close the store and radically change their adjacent restaurant, Drifter’s Wife. Ben McCanna/Staff Photographer
“The products that do make it through, there is no way the consumer will not see a huge jump. If not by 100 percent, then by something so close it will be prohibitively expensive,” Hale said. “Everyone thinks the EU will have to pay more to get products into the U.S. – that’s not true.”
The U.S. Trade Representative did not respond to an email asking when the tariffs might be enacted and at what percentage. The agency will accept public comments on the proposal on its website until Monday. Almost 15,500 comments were logged as of Tuesday.
Most dealers swallowed the earlier tariffs or found ways around them, said Cat Oster, owner of SoPo Wine Co., a small distributor in South Portland. The earlier tariff list had exceptions, such as sparkling wine, wines over 14 percent alcohol and in large volume, that people used to dodge the tariffs.
The revised product list eliminates those loopholes, Oster said.
“I carry a lot of European wines that fit into the current 25 percent tariff and more that fit into the broader sweep – it could be devastating,” she said.
Companies in Maine and elsewhere are planning alternatives for the worst-case scenario. Tabitha Perry, co-owner of Crush Distributors in Yarmouth, said 60 percent of her inventory is European. She’s planning a visit to Argentina to scout wines and expects to carry a lot more bottles from the southern hemisphere if the tariffs kick in.
The U.S. imported at least $4 billion in wine and $923 million in cheese from the EU in 2019, according to Wisertrade, an international trade database. It is unclear how much was shipped to Maine because most products are not imported directly into the state.
Just the tariff threat alone has affected the industry, Perry said. In recent weeks, she’s been unable to stock typically easy-to-find bottles because big distribution companies are buying out the market.
“It is really frustrating to feel that trickle-down effect, and the tariffs haven’t even gone through,” she said.
Even big players in the U.S. wine industry, which might logically benefit from less European competition, oppose the tariffs. Retaliatory tariffs for an unrelated trade issue threaten the $469 million in wine the U.S. exports annually to the EU, according to the Wine Institute, which represents California’s wine industry.
“Any expansion of tariffs on French or EU wine or sparkling wine products could significantly increase the likelihood of U.S. wines being retaliated against, and this would cause economic damage in the largest export market for U.S. wines,” the institute said in public comments on the tariff proposal.
While there are excellent domestic options, some European products do not have U.S.-produced replacements, said Will Sissle, owner of the Cheese Shop of Portland.
Sissle said he intends to adjust to a worst-case scenario and keep his business going, but would be disappointed if he is not able to offer customers everything they want.
“You can’t replace Reggiano and Gruyere and Pecorino – in the U.S. market there is no one producing that stuff,” he said.
Trying to punish European companies with U.S. imports is misguided, Sissle said, because a growing middle class in Russia, China and elsewhere is waiting in the wings to buy up what America can’t.
“What this administration doesn’t seem to grasp is that the American market brings in European goods, but countries like France and Italy don’t need to sell to it,” he said. “There are other markets that will easily grab it all.”
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