Trade Wars

With protectionist rhetoric flying around like corks at a Champagne tasting, it's easy to forget just how much prosperity has been generated by decades of liberalised trade. In the early part of the 21st century, free trade agreements and falling tariffs enabled producers from the EU and emerging regions to flourish, building up lucrative export markets that were hitherto restricted to domestic concerns. 

Yet in recent years, the global mood has shifted. Donald Trump's unveiling of a series of "reciprocal tariffs" on 2 April was merely the latest example of a resurgence in protectionist policies that threaten the hard-won gains of producers worldwide. And there may be worse to come.

"We anticipated the risk early on and worked closely with our importer to plan shipments ahead of time," says Riccardo Bogi, sales & marketing manager at Poggio Antico. Like many producers in Tuscany, Poggio Antico is holding its breath, hoping that Trump's threat to impose 50% tariffs - should negotiations with the EU fail - will never come to pass.

Bogi adds: "The overall discussion around tariffs is already influencing perception and may affect volumes in the near future, even if demand for our wines remains solid at the moment."

According to Massimo Romani, CEO of Italy's largest privately-owned wine group, Argea: "Front-loading [due to a perceived high risk of further tariffs] has led to a temporary slowdown in demand that we are currently experiencing. It remains to be seen whether the 10% rate will be confirmed beyond July or if further adjustments will be made."



For Argea and its competitors, mitigation and damage limitation are now top priorities. To that end, Romani has "initiated a constructive dialogue with all stakeholders along the complex supply chain leading to the US, to explore how the potential costs of tariffs could be shared or mitigated."

But the overall mood in winery boardrooms is apprehensive, at best. When the Prime Minister declared in April that "globalisation is over and the world as we knew it has gone," he arguably - for once - captured the zeitgeist perfectly. The India-UK Free Trade Agreement (FTA) signed in May, for example, excluded wine from the duty relief granted to gin and whisky – the current tariff remains at 150%. Meanwhile, once promising markets such as Russia have threatened to raise tariffs to 200%, levied against so-called "unfriendly nations" (including the EU, UK, and US).

Diversify thy wine

In today's mercurial trading environment, a growing number of producers are taking a hard look at their export strategies. A global fixation on headline destinations - particularly China and the US – has left wineries vulnerable to the volatile winds of geopolitics. Shifting alliances and political brinkmanship have prompted even well-established names to develop emerging markets as a buffer against the risks of over-reliance.

"Every wine-producing region in the EU would like to diversify exports and be less reliant on the US, but there is no easy answer for this, and different regions will have different priorities," explains Arthur Derail, IWSR senior market analyst – Western Europe and Northern Africa.

He continues: "Asia represents a big opportunity, although wine producers may be scared by what has recently happened with Cognac in China, and regulations make expanding in India very difficult. Japan, South Korea, Singapore, Hong Kong and Taiwan offer opportunities, but no boom in wine sales is expected in these markets. The UAE also represents a good, albeit small, opportunity, and exports have had strong growth there recently."



Australia is a case in point. After years of punitive tariffs from China, hostilities were finally eased last year when the Chinese Communist Party relaxed its import regime – tariffs had reached as high as 218% in 2023. Yet the experience has prompted a strategic pivot from many Antipodeans, wary of repeating the same mistakes.

"The trade freeze reminded us to maintain focus and deepen our presence in key regions like the UK and Southeast Asia," reveals Sam Barry, co-managing director at Jim Barry Wines.

"We're very conscious of the risks of over-reliance on any one market. While we see strong opportunity in China, particularly for premium and regionally expressive wines, we're focused on ensuring it doesn't come at the expense of a balanced market mix. A diversified global strategy remains fundamental to our long-term approach."

Jamie Bennett, MD at Berton Vineyards, reports that "there was an initial surge of optimism as we began refilling the supply chain to China, but it's become clear the market has moved on in many respects."

As a result, the business is committed to pursuing "a balanced global footprint," with diversification remaining "a key pillar of our strategy moving forward."

But untangling yourself from a key market is easier said than done.

"For Argea, as for many wine producers, there is no market in the world with the scale and potential of the US - certainly not in the short term," admits Massimo Romani.

"That said, we are actively working to strengthen our presence in other promising markets, such as Mercosur countries and the UAE. These are strategic bets for the future, but they require time and investment. They can complement our global strategy, but realistically, they won't replace the US market anytime soon."

Seizing new opportunities

For businesses able to navigate – or even benefit from - the shifting landscape, however, there is still money to be made. Indeed, Trump's "America First" rhetoric presents an opening for US domestic producers to strengthen their foothold at home, especially as buyers seek locally produced goods at competitive prices.

"According to some data we've collected recently, it is possible that a new US tariff regime will encourage US consumers to purchase more domestic beverage alcohol. For example, Scotch whisky consumers indicate their second-choice category is US whiskey. This suggests that a price increase in the former could benefit the latter," says Marten Lodewijks, President of IWSR US.

Back in the UK, leading producers have also been gaining traction across the Atlantic, as English fizz catches the eye of sommeliers and retailers alike. Meanwhile, the EU-Japan Economic Partnership Agreement has eliminated all tariffs on EU still/sparkling wines, while the UK-Australia FTA - ratified in 2023 - has been warmly received by both winemakers and retailers. The Nordic economies, too, are showing great promise for English wineries.

According to Ruth Simpson, co-founder of Simpsons Wine Estate: "Alko, the Finnish monopoly, is taking inspiration from the Norwegians as they recently had a wide ranging tender for six different English still and sparkling wine categories. Simpsons won three out of six with the following wines: Flint Fields Blanc de Noirs, Gravel Castle Chardonnay, and Chalklands Classic Cuvee NV Brut."

Perhaps the reports of free trade's demise have been exaggerated: global supply chains are adapting, and Africa and Asia are emerging as new growth frontiers. But with Trump back in the White House until 2028, volatility - and ongoing tensions between the US and its once-close trading partners - are likely to remain a quotidian fact of life.