Looming tariffs on Europe may increase costs for US winemakers

It's bottling season for wineries across the country and in Temecula Valley, California, Wilson Creek Winery and Vineyards owner Bill Wilson gave ABC News a tour of his operation.

As employees bottled their famous "white" cabernet sauvignon, Wilson pointed out their signature blue glass bottles as they moved down a conveyer belt.

"People buy it just for the blue bottles, they're absolutely gorgeous," Wilson told ABC News.

The Trump administration imposed a total 20% import tax on all goods coming from China as of March 4. That includes a 20% tariff on the blue glass from China, which could make wineries like Wilson's turn to domestic manufacturers.

"We will compare suppliers for sure because its tens of thousands of dollars it will cost us," Wilson said.

The new tariffs are raising costs for businesses all over the world including in the U.S., but the wine industry is reeling after President Donald Trump threatened to impose a 200% tariff on all European wine and alcohol on April 2.

"A 200% tariff makes EU wine basically unmarketable in the United States," Harry Root, the president and owner of Grassroots Wine in Charleston, South Carolina, told ABC News.

Root's business is wine importer and distributor, one of more than six thousand in the U.S. They are critical to supplying imported wine directly to restaurants and retailers all over the country.

He noted that European wine makes up 60% of his wine sales and accounts for 75% of his gross profit.

"We are faced with a big quandary. We have wine on the water right now that is under threat of 200% tariffs if it doesn't land by April 2. That's a totally unpredicted bill," Root said.

"We didn't know this when we ordered this wine, we didn't know it when we put it on the boat, so for us and for my family and small business, we employ 50 people. These could be half a million-dollar hit to us to pay tariffs of 200%. We don't have that money cash lying around."

According to the U.S. Wine Trade Alliance, the U.S. imports around $5.4 billion dollars in wine from the European Union and generates more than $24.5 billion dollars for the U.S. economy.

Trump has said these tariffs would bring more jobs to the U.S., but Root disagreed.

"Tariffing the wine industry does nothing but hurt American jobs. Companies make $4.50 cents for every dollar that European companies make on wine and that goes even further when the wine gets channeled through restaurants," Root said.

"So, we would see massive pain and vulnerability in the entire restaurant industry. I think we would see jobs contract in the United States if it was drawn into a trade war."

Trump argues other countries have been "ripping off" the U.S. for years, imposing their own tariffs on U.S. goods.

Starting in June 2018, the U.S. and European Union traded on again off again retaliatory tariffs on wine and alcohol from both sides of the Atlantic. In June 2021, they agreed to a five year suspension of tariffs on spirits and wines, according to Distilled Spirits Council of the United States (DISCUS).

Trump is also implementing 25% tariffs on steel and aluminum from all countries.

Winemaker Kristina Filippi said the trade war leads to uncertainty with costs and even threatens to snarl the supply chain, which affects production timelines. Her winemaking materials are sourced from all over the world.

"Maybe I need to replace a part or something," Filippi told ABC News. "For me, I just feel like I'm holding my breath a little bit."

Trump said this would fulfill his mission: overseas tariffs bringing more business back to the U.S. Root acknowledged that European wine getting more expensive might create a surge in demand for domestic wine.

"I think it would be potentially a good thing for U.S. wineries in the beginning. We all know supply and demand: if the supply is reduced by European wine no longer being a viable product in the United States, the demand is going to go up on the supply that's left," Root said.

"So, we'll see prices rise on American wine as well. The end result will be for restaurants, which are the end buyer of all of our products, increased prices which is going to mean lower profits and slower business."