The ongoing tariff disputes between the United States and the European Union have left the Arizona wine and spirits industry contemplating potential impacts on their operations. Local industry players express concerns over the uncertain future as tariff threats loom over their business supplies and consumer prices.
Earlier in March, President Donald Trump proposed a 200% tariff on European wines and spirits, following the EU’s announcement of a 50% tariff on American whiskey. This week, the situation took a turn when the EU approved retaliatory tariffs on U.S. goods, ranging from 10% to 25%. However, these were paused as Trump announced a 90-day pause on most new tariffs.
Arizona’s wine industry, particularly its suppliers and distributors, may be impacted by these tariffs. Kent Callaghan, owner and winemaker of Callaghan Vineyards in Elgin, mentions that his business relies on European barrels and corks. Despite having the option to switch to American suppliers, Callaghan prefers European oak for its flavor profile, stating, “I much prefer using European oak, French in particular.”
Although Callaghan’s business primarily sells within Arizona, and thus may not feel the direct impact of international tariffs, the costs of supplies might still rise. Similarly, Mark Beres, president, CEO, and co-founder of Flying Leap Vineyards & Distillery, shares this sentiment. He notes that most of their production is for local consumption, insulating them from direct effects of retaliatory tariffs on American goods.
According to Beres, the real challenge lies beyond tariffs, with issues such as inflation and an oversupply in the wine market amid dwindling demand. A significant factor is the generational shift in drinking habits, as younger generations are showing a preference for alternatives like marijuana, now legal in Arizona.
Ken Phox, president of Tequila Corrido, sees the same cultural shift affecting spirits and has adopted a “waiting pattern” until tariffs are implemented. His brand, with distribution across 11 states, has already seen changes in order patterns due to the tariff uncertainty. “We haven’t even gotten hit with tariffs, but we’ve had distributors in Texas actually increase their orders from us,” Phox said.
While the specific impact on consumer prices remains uncertain, Callaghan notes that prolonged trade tensions could necessitate passing supply and production cost increases onto consumers. However, local wineries might experience minimal effects due to their business model, which avoids intermediaries.
Beres is skeptical about the direct impact of tariffs on his business but acknowledges potential changes in wine demand, stating, “If demand goes up for American wines, or for local wines in particular, then we would see some bump in there.”
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