How an aircraft dispute with Europe might raise prices on your wine and cheese in Connecticut
"The list reads like something that could go under the header of 'things that are delicious,'" begins the Oct. 28 email newsletter from Thames River Wine & Spirits. "French, Spanish and German wine. Spanish olives. Parmesan. Stilton. Currant jelly. Single Malt Scotch & Irish Whiskey."
The New London retailer was referring to the new 25 percent tariff — a tax on imports — on certain products from the European Union. The tariff went into effect Oct. 18 but stores still have inventory shipped before then, so Thames River Wine & Spirits encouraged customers to come try pre-tax bargains.
The shop is having a Scotch tasting on Dec. 18, but co-owner Fred Argilagos said he got the Bruichladdich whisky from Scotland before the tariffs went into effect.
He noted that his customers appreciate better wines, and that the people who are going to buy Burgundy or niche wines, items that are already expensive, are going to buy them regardless.
The tariffs are the result of a dispute between the United States and European Union, dating to 2004, over subsidies the EU and its member countries granted to the EU's large civil aircraft domestic industry, according to the Office of the United States Trade Representative.
In May 2018, the World Trade Organization's Dispute Settlement Body adopted reports confirming that launch aid to two Airbus airliners breached agreements and was detrimental to the U.S.
This past April, the U.S. Trade Representative began an investigation to enforce U.S. rights in the dispute. On Oct. 2, the World Trade Organization arbitrator concluded that the appropriate level of countermeasures is about $7.5 billion, which ended up being the annual trade value of the final list of tariffed items.
Impact still in early stages
At North Haven-based importer and distributor Slocum & Sons, portfolio manager Gia Pascarelli knew the dispute was in process and being heard in front of the World Trade Organization.
But the Oct. 18 date was unfortunate for the company: Slocum & Sons already had containers from France on the water and the first arrived in New York on Oct. 20, so it had to start paying.
The company's customers are restaurants, bars and retail stores. Pascarelli said that compared to November in previous years, Slocum & Sons has seen a spike in sales the past few weeks, as customers look to buy pre-tariff inventory. She expects that all the company's wines will have the tariff applied by January.
Pascarelli said Slocum & Sons is trying to absorb some of the 25 percent tariff, and it helps that the U.S. dollar is strong right now, so the company's prices are going up between 10 percent and 20 percent on most affected products.
While Slocum & Sons hasn't stopped buying anything, it has changed its planning by purchasing a 30- or 60-day supply instead of a longer-term one, hoping for a resolution that eliminates the tariffs.
Pascarelli thinks people don't understand that tariffs have an implication for consumers.
"I think there's this abstract concept of tariffs as something that happens at a very high level and it only impacts industries," she said, "and tariffs are a tax, and the government collects the money and somebody has to pay for it."
Impacted wines include Sancerre, Provencal rosé and German riesling. Pascarelli said domestic producers feel they'll now have a better chance with domestic rosés, but the other two are harder to replace.
She pointed to The Wise Old Dog liquor store in West Hartford as a Slocum & Sons customer that will be among the most impacted.
Since a package store is the last place for a bottle before the consumer's hands, owner Jacob Studenroth indicated the trickle-down effect hasn't fully hit stores yet, so it's "really early to talk about the impact."
But he's anticipating price increases, especially considering about 35 percent to 40 percent of his inventory is French wine.
"That's what's cherished by our clients, and we've spent years developing a reputation and devotion and a palate, and through education helping our clients learn more about it, so we're certainly not going to jump ship," Studenroth said. "In terms of its uniqueness or its specialness, that's why I got up this morning."
He spoke of the importance of terroir, or the specific environment in which a wine is produced.
The idea that he could just get a wine somewhere else "runs counter to why I do what I do with my life," Studenroth said with a laugh. "The whole point is that pinot noir tastes different when it's from Burgundy than from Oregon or California."
One plus is that the tariff doesn't apply to wines with over 14 percent alcohol content, which is most wine coming from the southern Rhône. He also pointed to the strength of the dollar and said that as far as buying power, "I think we're going to be able to ride it out just fine." He's hoping that importers spread the price increases across their entire portfolios.
Studenroth said that stocking up on pre-tariff alcohol is more relevant for businesses that sell things that are readily available, whereas the wines he stocks up on are ones he would stock up on regardless of the tariffs.
In a different boat is Big Gary's Montville Wine & Spirits, where owner Gary Trombley said about 90 percent of the wines are domestic or non-European.
He hasn't seen a huge price increase in anything he's purchased so far, saying that by the time the price trickles down to him, the impact is "diluted." The tariffs are not impacting what Trombley chooses to purchase and sell.
He did say that while he didn't want to raise the prices of cordials like Baileys Irish Cream and Kahlua before the holidays, they'll probably go up in 2020.
Trombley said he is OK with the tariffs if they help the American people, saying that other countries should pay their share.
Stephen Downes, president of the Connecticut Package Stores Association and owner of CT Beverage Mart, said he's just starting to see the impact of the tariffs, and that stores will be hit harder in December and January.
He was surprised to hear how much the price of Baileys is going up, and he heard a few complaints in his store recently about the rising price of Tanqueray.
"I'm not a big fan of tariffs, but I'm also not a big fan of people taking advantage of our country," he said.
Prices go up for French and Italian cheeses
At Fromage Fine Foods & Coffees in Old Saybrook, owner Christine Chesanek is seeing the impact on French triple-crème cheeses, French brie, Roquefort blue and Parmigiano-Reggiano — or all Italian cheeses, for that matter.
She is passing the price along "because we have to," about 18 percent to 20 percent rather than the full markup, but business hasn't slowed.
She said purveyors have been telling her to push domestic cheeses, but those are already more expensive because they're artisanal — produced in small batches on small farms.
"I think it's going to turn around, but I don't know how long," Chesanek said.
She is sure that grocery stores are passing along the price increases to their customers, as well. A spokesperson for Stop & Shop declined to comment.
At The Cheese Corner in Westerly, co-owner Paula LaBarre said that other than with Parmigiano-Reggiano and Pecorino, she hasn't seen much of an impact from the tariffs.
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