Uh oh, Pinot: How tariffs will impact the U.S. wine economy

Summary

Marketplace Morning Report: "Uh oh, Pinot: How Tariffs Will Impact the U.S. Wine Economy"
Release Date: April 8, 2025
Host: David Brancaccio

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Introduction and Market Overview

In the April 8, 2025 episode of Marketplace Morning Report, host David Brancaccio delves into the intricate relationship between U.S. tariffs and the wine industry. The episode begins with an overview of the current economic climate, highlighting a significant upturn in the stock market influenced by recent comments from U.S. Treasury Secretary Scott Besant regarding tariff negotiations.

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Economic Indicators Amid Tariff Discussions

Brancaccio opens the discussion by addressing the stock market's brisk updraft, noting substantial gains across major indices:

• Dow Jones Industrial Average: Up 2.9%, approximately 1,100 points.
• S&P 500: Up 2.9%.
• Nasdaq Composite: Up 3.4%.

Conversely, bond markets experienced declines, reversing previous trends where bonds had been seen as a safe haven during stock market volatility. This shift led to an increase in interest rates, with the 10-year Treasury yield rising to 4.24% after previously dipping below 3%.

Jeffrey Cleveland, Chief Economist at Paden and Regal, provides insight into this volatility:

"[...] over the last few weeks that yield has what we'd say plunged in response to some of the events of the world. So as stock market sold off, bond yields fell. [...] bonds in their portfolio [are] volatile for really everybody."
[01:18]

Cleveland further explains the conflicting forces in the bond market:

"[...] the tariffs could slow the economy and bring down economic growth and therefore push down bond yields. On the other hand, [...] tariffs will push up prices which could create inflation. And bond investors hate inflation, [...] pushing yields back the other direction."
[02:03]

Brancaccio summarizes the current economic landscape:

"Indices are up sharply this morning with the vibe that tariffs may be temporary if trading partners come to the negotiating table. The S&P now up 3.5%. The Nasdaq is up nearly 4%. The Dow is up 1,285 points (3.4%). The VIX index of stock volatility down 18%..."
[07:17]

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Tariffs on EU Wine: Background and Details

The core focus of the episode centers on the U.S. tariffs on European Union (EU) wine. Initially, President Trump had threatened 200% tariffs on EU wine imports, but the final imposition settled at 20% tariffs across all EU-imported goods, including wine. This development has significant ramifications for the U.S. wine economy.

Damien Carney, owner of Avinage Wine Shop in Petaluma, California, shares his apprehensions:

"Basically, I would either have to increase prices [...] from importers or try to completely turn around my entire business model."
[05:09]

He further emphasizes the challenges of shifting to domestic wines:

"Even if he did switch gears and stock more US Wines, his customers won't be happy with California Pinot Noir if what they really want is French."
[05:21]

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Impact on U.S. Wine Businesses

Small Retailers: Avinage Wine Shop

Damien Carney illustrates the direct impact on retailers heavily reliant on imported wines:

"Imported wines make up 75% of his inventory, so additional tariffs would upend his business."
[04:50]

The added costs from tariffs would force him to either pass on higher prices to consumers or overhaul his business model, both of which present significant challenges in a market already facing declining sales.

Trade Associations: U.S. Wine Trade Alliance

Ben Aneff, head of the U.S. Wine Trade Alliance, highlights the broader economic implications:

"The United States imports about $4.5 billion worth of wine from the EU and U.S. businesses make about $25 billion in revenue from the sale of those products."
[05:58]

Aneff warns that the tariffs will reduce profitability for all parties involved in the import and sale of European wines, including restaurants and retailers, exacerbating the industry's struggles amid decreasing consumer interest.

Domestic Producers: Santay Arc Angeli Winery

Even U.S. producers are not immune to the tariff impacts. John Benedetti, owner of Santay Arc Angeli, discusses the compounded challenges:

"All of my barrels come from France."
[06:38]

"I have no choice but to pay any kind of tariff that gets slapped on these things."
[06:40]

Benedetti shares his frustrations with market access:

"I've been working for seven years to get into the LCBO and it just went poof."
[06:57]

The imposition of new tariffs on Canadian products led to the banning of U.S. wine imports in several provinces, eliminating Benedetti's opportunity to enter the Canadian market.

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Economic Implications and Future Outlook

The episode underscores the complex interplay between tariffs, market dynamics, and economic indicators. While the stock market reacts positively to potential negotiations easing tariff tensions, the bond market remains volatile due to conflicting economic pressures.

Brancaccio emphasizes the importance of monitoring these developments:

"This week we need to keep an eye on the ferocious gyrations."
[07:17]

He concludes by reminding listeners that the economy encompasses more than just stock market performance, hinting at the broader, often tumultuous, economic landscape influenced by policy decisions like tariff implementations.

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Conclusion

David Brancaccio's episode, "Uh oh, Pinot: How Tariffs Will Impact the U.S. Wine Economy," provides an in-depth analysis of the ripple effects of U.S. tariffs on the wine industry. Through expert interviews and real-world examples, the episode highlights the precarious position of both import-dependent retailers and domestic producers. As the economic environment continues to evolve, the tensions between maintaining competitive markets and protecting domestic industries remain a central theme affecting various sectors.

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This summary is based on the transcript provided and aims to capture the essential discussions and insights presented in the episode. For a more comprehensive understanding, listening to the full episode is recommended.

Transcript

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[Jeffrey Cleveland]

You.

[David Brancaccio]

We'Re seeing a brisk updraft in the stock market this morning. I'm David Brancaccio in Los Angeles. After the US Treasury Secretary Scott Besant appeared on TV stressing that tariffs are leading to negotiations. It was a hint at least that some of President Trump's import taxes may not persist in the fullness of time. Stocks then surged higher. The dow is up 2.9%, about 1100 points. The S&P is up 2.9%. The Nasdaq Composite is up 3.4%. Conversely, bonds that have been riding higher as stocks plummeted in recent days. While those are down today, pushing interest rates higher, the 10 year rate is up at 4.24% after dropping below 3%. Jeffrey Cleveland is chief economist at Peyton and Regal, an investment firm that knows its way around bonds.

[Jeffrey Cleveland]

Well, I think it was hectic and stressful for everyone. But as a bond market economist, when people say the market, first thing I think of, David, is the yield on the 10 year treasury note, the US treasury note. And over the last few weeks that yield has what we'd say plunged in response to some of the events of the world. So as stock market sold off, bond yields fell. And that relationship is a good reminder that investors need bonds in their portfolio. I think.

[David Brancaccio]

Yeah, and I do take your point, but I also take your point that it has also been volatile for bond portfolio holders because this morning it's all reverse. Stock market's up and interest rates are up. Bonds are down. It is a volatile time for really everybody.

[Jeffrey Cleveland]

That is true. And I think what the bond market is wrestling with, David, are two different forces. The tariffs could slow the economy and bring down economic growth and therefore push down bond yields. On the other hand, at least in the short run, I think the tariffs will push up prices which could create inflation. And bond investors hate inflation, David, and that has the consequence of pushing yields back the other direction. So we sort of have a tug of war or a battle going going on right now as well in the bond market.

[David Brancaccio]

Jeffrey Cleveland is chief economist at Paden and Regal, the investment firm. He's based in Los Angeles. Thank you, Jeffrey.

[Jeffrey Cleveland]

Have a good week.

[David Brancaccio]

David Farmers, other producers and shippers of US Humanitarian aid will hold a rally on Capitol Hill today. This has the Trump administration cut more than a billion dollars worth of programs aimed at saving lives, including emergency food aid. This is assistance the administration had promised to protect marketplaces. Nancy Marshall Genzer has that more than.

[Nancy Marshall Genzer]

$1.3 billion worth of humanitarian aid was cut over the weekend, according to the grassroots advocacy group Stand up for Aid. The group says that includes funding for Haiti, Somalia, Syria and Yemen. In a post on X, the World Food program stated that US funding for emergency food assistance in 14 countries was terminated. It says that could, quote, amount to a death sentence for millions of people facing extreme hunger and starvation. The WFP says it's in contact with the Trump admin seeking clarification and urging continued support for life saving programs. Secretary of State Marco Rubio had promised to spare life saving humanitarian assistance from cuts, issuing a waiver for them in January. The State Department didn't respond to a request for comment by Deadline. I'm Nancy Marshall Genser for Marketplace.

[T Mobile Advertiser]

Breaking News T Mobile Network outperforms expectations in all sectors because T Mobile helps keep you connected from big cities to your hometown on America's largest 5G network. Switch now keep your phone and T Mobile will pay it off at the $800 per line via prepaid card. Visit your local T Mobile location or learn more@t mobile.com KeepAndSwitch up to four lines of your virtual prepaid card. Allow 15 days qualify and unlock device, credit service port in 90 plus days, device and eligible carrier and timely redemption required Card is no cash access and expires in six months.

[David Brancaccio]

Last month, President Trump said he would impose 200% tariffs on wine from the European Union. As you know, they do a lot of wine over there. What we got in the end was the 20% tariffs on everything from the EU, including wine. US wine producers might benefit. Tina Caputo has that.

[Damien Carney]

At Avinage Wine Shop in Petaluma, California, owner Damien Carney arranges bottles of Sicilian Whites and French Carignan on a display table. Even though his shop is in Sonoma Wine Country. Imported wines make up 75% of his inventory, so additional tariffs would upend his business.

[David Brancaccio]

Basically, I would either have to increase prices by whatever the price increase is coming to me from importers or try to completely turn around my entire business model.

[Damien Carney]

He says that even if he did switch gears and stock more US Wines, his customers won't be happy with California Pinot Noir if what they really want is French.

[David Brancaccio]

Just simply giving them a wine from Sonoma county or from Paso Robles is not going to be the same as the wines that they know and love.

[Damien Carney]

Higher costs are the last thing the wine industry needs right now. A 2025 report from Silicon Valley bank shows that wine sales are down due to lukewarm interest among younger consumers and competition from drinks like hard seltzer. Ben Aneff is head of the U.S. wine Trade Alliance.

[David Brancaccio]

The United States imports about $4.5 billion worth of wine from the EU and U.S. businesses make about 25 billion in revenue from the sale of those products.

[Damien Carney]

Andepf says the tax will mean less money for anyone selling European wines in the U.S. including restaurants and retailers.

[David Brancaccio]

Imported wines are actually one of the very few places you can make a pretty good margin.

[Damien Carney]

You might think that US Producers would be cheering, but even domestic wineries are worried. John Benedetti is the owner of Santay Arc Angeli, a small winery in California. Benedetti says he's already paying a high tariff on wine bottles from China and Mexico and his barrels come from the eu.

[David Brancaccio]

All of my barrels come from France.

[Jeffrey Cleveland]

So I have no choice but to.

[David Brancaccio]

Pay any kind of tariff that gets slapped on these things.

[Damien Carney]

That's one more hit to his business in a down market. Just last month, Benedetti lost a chance to break into the Canadian export market through the lcbo, Ontario's Liquor Control Board.

[David Brancaccio]

I've been working for seven years to.

[Jeffrey Cleveland]

Get into the LCBO and it just went poof.

[Damien Carney]

After the US Imposed new tariffs on Canadian products, many provinces banned imports of US Wines and Benedetti's entry into that new market disappeared. In Sonoma County Wine Country. I'm Tina Caputo from Marketplace and stock.

[David Brancaccio]

Indices are up sharply this morning with the vibe that tariffs may be temporary if trading partners come to the negotiating table. The S and P now up up 3.5%. The Nasdaq is up nearly 4%. The Dow is up 1285 points 3.4%. The Vix index of stock volatility down 18% but certainly not down to the chilled out level or anything. My colleague Kai likes to say there's more to the economy than the stock market. Yet this week we need to keep an eye on the ferocious gyrations. Listen to the afternoon evening program on many public radio stations. We are from apm American Public media.

[Jannelli Espinal]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host, Jannelli Espinal, and each week I ask X experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined wherever you get your podcasts.