French winemakers jittery over Trump tariff threats ahead of G-7 summit

While putting on a brave face, the French wine sector - the world's top exporter in terms of value and third in volume - is making contingency plans.
While putting on a brave face, the French wine sector - the world's top exporter in terms of value and third in volume - is making contingency plans.PHOTO: AFP

PARIS (AFP) - French winegrowers are on tenterhooks as they wait to see whether US President Donald Trump will follow through with his repeated threats to raise tariffs on French wine in retaliation for the new Gafa tax.

As the leaders of the world's richest countries gather for the Group of Seven (G-7) summit opening Saturday (Aug 24), winegrowers in host nation France fear they will have to suffer consequences from the new French tax on the US tech giants.

Representatives of the Gafa corporations - Google, Apple, Facebook and Amazon - on Monday railed against the tax aimed at plugging a loophole that allows the firms to pay next to nothing in countries where they make huge profits.

They called the tax "discriminatory" and a "troubling precedent".

Meanwhile, while Mr Trump has repeatedly warned of retaliation, on Aug 9 suggesting a 100 per cent tax on French wine imports to the United States, according to the Bloomberg news agency.

Mr Trump, though a teetotaller, had tweeted in late July that "American wine is better than French wine!"

While putting on a brave face, the French wine sector - the world's top exporter in terms of value and third in volume - is making contingency plans.

 
 
 
 

Will Americans - who bought 1.6 billion euros (S$2.5 billion) worth of French wines and spirits last year - be willing to pay double for their favourite Cote du Rhone?

"We have to take the American president's threats seriously," said Mr Jerome Despey, the head of the wine industry section of France's leading agricultural union FNSEA. "Wine cannot be held hostage in an international trade negotiation."

Even before the French parliament approved the Gafa tax on July 11, Mr Trump had hinted on numerous occasions that he could impose customs duties on French wine. But at the time the rationale was one of unfair competition with American wines.

"France charges us a lot for the wine and yet we charge them little," the US president told CNBC in June, adding: "And you know what, it's not fair. We'll do something about it."

Imported wine currently faces US duties of 5.3-12.7 US cents (S$0.07-S$0.18) a bottle, while US wines shipped to the EU face duties of 11-29 US cents a bottle, according to trade bodies.

Mr Trump repeated the threat on July 26 when he mooted a "substantial reciprocal action" in response to the Gafa tax, which is expected to raise 400 million euros this year, growing to 650 million euros by 2022, according to the French economy ministry.

The contingency plans vary among winegrowing regions. In Champagne, "of course we're worried because the United States is our leading market in terms of value after France", said regional winegrowers representative Maxime Toubard.

But he said he remains confident because "American consumers like champagne".

In the southwestern Cognac region - which exports nearly half of its production to the United States - one industry figure said business leaders were vigilant but "nothing is confirmed".

Mr Thomas Montagne, president of the European Confederation of Independent Winegrowers, noted that cheaper and mid-range wines were most at risk from new US tariffs, as opposed to reserve wines.

The high-end wines that will lose market share in the United States because of tariffs will still find other export markets, said Mr Montagne.

"While (grands crus) aren't consumed in the United States, they will be elsewhere," he said. "These are wines that can be put away for years and can wait before being sold," Mr Montagne told France Inter radio.

Mid-range and cheaper wines will "pay the price" imposed by US tariffs, he said.

In Provence, bolstered in recent years by a growing US preference for rose wines, the concern is deep.

The region's US exports have risen from "practically nil" to 46 per cent in a decade, a local industry source said.

Two labels, in particular, account for the boom: Whispering Angel by Var winegrower Sacha Lichine, and Cotes de Provence Rose Miraval produced by the Provencal estate of Hollywood stars Brad Pitt and Angelina Jolie.

"They hit their target of young consumers by projecting a festive image mixing the natural, free-flowing lifestyle of the South (of France), and the whole industry got behind it," the source said.

In the United States, rose has become synonymous with Provence, said Mr Jean-Jacques Breban, president of the region's wine federation, which is actively seeking new markets, notably China.

"With the United States and Mr Trump, we're flying blind," a top French wine official said, adding that existing concerns over Brexit - Britain is France's second wine export market - make the US tariff threat "even harder to take".