California's wine industry leery of tariffs, but some growers hope they help

LODI, Calif. (AP) — Escalating trade tensions between the U.S. and Europe are being closely watched in California’s iconic wine industry, which is already struggling due to declining global wine consumption, rising costs and swings in weather.

Many fear tariffs will hike the costs of wine-making materials and dampen U.S. importers of European wines. The Wine Institute, which advocates for California wineries, said the tariffs will "hurt the broader wine sector including farmers, vintners, distributors, retailers and the millions of people working across the extended wine supply chain.”

But some winegrape growers in the Golden State are hoping for a silver lining.

Four-decade winegrape grower Craig Ledbetter said it costs more for him to farm in California than it would in wine-producing countries like Chile and Australia, and his industry doesn’t get the government support European grapegrowers do. A partner at family-operated Vino Farms in Lodi, Calif., Ledbetter said he left thousands of tons of winegrapes on the vine two years ago due to paltry demand and has shifted some land into more lucrative pistachios.

He said he sees President Donald Trump’ s call for a 200% tariff on European wine, Champagne and spirits as a starting point, not an end to negotiations, and hopes in the long-run that tariffs will improve his lot.

“I think it’s all going to work itself out, and I think it will equal our playing field a little bit,” he said. “As a farmer I have to look at it through an optimistic lens, because if I don’t, you know, what am I doing?”

Many wine advocates and experts have warned that tariffs are expected to hurt U.S.-based importers and increase the cost of supplies such as wine barrels and glass bottles. They say Trump's latest move — in response to European plans for a 50% tariff on American whiskey — could draw retaliatory tariffs that would wallop U.S. exports of wine to Europe.

Already, U.S. wine is facing a 25% import tax in Canada — the destination for a third of California's wine exports in 2022 — since the Trump administration slapped tariffs on a series of Canadian goods. Jessie Vallery, director of marketing and operations for Alexander Valley Winegrowers in Sonoma County, said Canada has already pulled U.S. wines from the market.

California produces about 80% of U.S. wine and shipped about 24 million cases of wine overseas in 2023, according to Wine Institute figures.

The state's wine industry is already under tremendous pressure due to shifting consumption patterns as well as rising farming costs, wildfire smoke exposure and drought. The total amount of wine consumed per capita in the United States in 2023 was the lowest in more than a decade, according to the Wine Institute.

Most California wine is consumed in the United States. But wine exports are a key agricultural commodity for the state. Valued at $1.3 billion in 2022, wine exports trail only almonds, dairy and pistachios, state data show.

Mainstream economists are generally skeptical about tariffs, considering them an inefficient way for governments to raise revenue.

Stuart Spencer, executive director of the Lodi Winegrape Commission, said tariff talk bogged down his recent trip to Europe to promote California wines.

Wine is especially vulnerable to trade wars because location matters as wine is marketed based on the region where grapes are grown and is not an interchangeable good, he said.

“It has created a lot of chaos and uncertainty,” he said, adding European buyers worried there could be retaliatory tariffs driving up the cost of U.S. wine. "It has created a lot of hesitancy, which is leading to cancelled sales.”

But in the short term, higher tariffs on European wines might make California wines relatively more affordable and create some new opportunities, said Rob McMillan, executive vice president and wine division founder at Silicon Valley Bank.

Keith Saarloos said he doesn't export wine from his estate vineyard in Santa Barbara wine country, and only sells direct to consumers “from our plow to your porch.”

He said the tariffs are just another bump during a tumultuous time in an industry he likened to offroading, and he hopes something good comes from it.

“I would love every single person to focus all their attention on new wines,” Saarloos said. “I have to remain optimistic.”

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Taxin reported from Santa Ana, California