American buyers are snapping up top wines from France and Spain
London, UK:
Activity on the Liv-ex fine wine exchange has surged in response to news that the US tariffs on European wines have been suspended. US buying activity was up 36% in the days following the announcement, as American buyers flocked to snap up the wines previously subjected to the tariffs.
On Friday 5th March, the United States Trade Representative (USTR) and European Trade Commission announced in a joint statement that all tariffs related to the Boeing-Airbus dispute would be suspended for four months.
Before the announcement, Bordeaux accounted for just 4% of firm bids to buy on Liv-ex among US buyers. One week on from the announcement, the region now accounts for 55% of these firm bids, with the most sought-after wines being top Left Bank vintages (05, 09, 10, 15 and 16).
Thanks to this renewed interest from the USA, Bordeaux’s share of total trade value on Liv-ex increased from 41% to 45.7%, having accounted for just 37.8% of trade in February. Although largely driven by wines from Pauillac and the First Growths, Saint-Julien, Saint-Emilion, Pomerol and Margaux were also in demand.
Other previously tariffed regions, such as the Rhône and Spain, also saw a significant uplift in LIVE bids. The value of LIVE Rhone bids from US merchants rose from 3% to 8%, with demand largely surrounding 2016 Châteauneuf-du-Pape.
This increase in demand for Bordeaux has largely come at the expense of regions that were previously exempt from the tariffs. Italy, for example, accounted for 25% of US bid values last week, but this has since fallen to 14%. That said, demand for Italian wines remains robust and the region still accounted for 41% of US trade value in the past week.
Background
Previously, in October 2019, due to an ongoing trade dispute with the EU, the United States Trade Representative (USTR) imposed a 25% tariff on EU wines under 14% ABV. Those tariffs were extended on the 31st December 2020 to include wines of all ABVs.
Both entities had previously accused the other of illegally subsidizing their respective aerospace companies. In 2019, with acknowledgment from the World Trade Organization that the EU had unfairly subsidized Airbus, the US imposed tariffs on a range of EU exports, ranging from tractors to wines and spirits, worth up to US$7.5 billion.
Last year the WTO likewise ruled that the US had illegally subsidized Boeing, paving the way for the EU to impose tariffs of its own on US products, worth approximately US$4bn.
Although the dispute pre-dated President Donald Trump coming to office, his administration’s ‘America First’ policies saw him enthusiastically embrace the introduction of tariffs and relations between the US and EU undoubtedly hit a low during his presidency.
With the election of Joe Biden last November, however, it was hoped the relationship could be repaired and the tariffs abolished, although there were doubts this would be an immediate priority for the new administration.
Events have moved rather faster than expected. In December last year the UK said it was voluntarily suspending its tariffs on US goods, which was reciprocated by the US on Thursday 4th March.
On the 5th March, US and EU trade officials then announced they had agreed a four month suspension on all of the tariffs that had been imposed since 2019.
Both sides called the decision a “fresh start” and a “reset” of the relationship, with European Trade Commissioner, Valdis Dombrovskis, saying that: “Removing these tariffs is a win-win for both sides, at a time when the pandemic is hurting our workers and our economies.”
The tariffs have had a singular effect on the fine wine market over the last 18 months, not least for Italy and Champagne whose wines were excluded from the extra 25% levy.
As a result, both regions saw extensive gains in the secondary market, increasing their market share and with improved price performance for many labels. Italy’s share of trade by value in 2020 was its highest-ever.
With the tariffs due to be reviewed by the US and EU in four months’ time, it will be interesting to see the effect this truce has on trading behavior in the interim.
About Liv-ex
Liv-ex is the global marketplace for the wine trade. Along with a comprehensive database of real-time transaction prices, Liv-ex offers the wine trade smarter ways to do business. Liv-ex offers access to $112m worth of wine and the ability to trade with 500 other wine businesses worldwide. They also organize payment and delivery through their storage, transportation and support services. Wine businesses can find out how to price, buy and sell wine smarter at www.liv-ex.com.
Further information
Automation helps fuel rising trade post tariffs: https://www.liv-ex.com/2021/03/automation-helps-fuel-rising-trade-post-tariffs/
What a difference a (tariff-free) week makes: https://www.liv-ex.com/2021/03/talking-trade-difference-tariff-free-week-makes/
Trade jumps in the wake of US-EU tariff truce: https://www.liv-ex.com/2021/03/trade-jumps-wake-us-eu-tariff-truce/
The fine wine market in 2020: https://www.liv-ex.com/2020/12/new-report-fine-wine-market-2020/
