Yes. I read the post to which you were responding. I stated that the tariffs are calculated based on the cost to the importer. As you, IMO, correctly stated in the post to which I responded, it is likely that the distribution chain will absorb a portion of the tariff cost. Therefore, the cost to the end-user customer will likely not even be as high as 25% of the import cost. In my opinion, importers, distributors and/or retailers that apply a markup percentage to the cost of tariffs imposed are likely to soon find their doors closed, and deservedly so.
My answer was based on the assumption of a 25% increase of the import price. But if the middlemen’s margin percentages remain the same, the ultimate retail price will be 25% higher.
Yes. I went back and looked at that post again. My apologies. You are correct that he did state assuming the markups stay the same. I agree with you that $62.50 is correct under that assumption. However, I believe you and I are both in agreement that particular assumption is a bad one.
It will be an interesting economic experiment. I do not think that it is as simplistic as to say retail prices will go up by 25%. If that were the case (and all other variables were the same) that would simply mean that retailers were not charging enough for the wine currently. The laws of supply and demand will have to kick in, and the price will ultimately settle at a point the market will bear. If people aren’t willing to spend 25% more, then retailers will have to drop prices. Perhaps consumers will be willing to suck up a 10% increase, but maybe no more, which would ultimately force the wineries and wholesalers to suck up the rest. It’s a losing proposition for everyone really, but at the end of the day, the market will ultimately determine what people should pay for post-tariff bottles.
I personally would just increase my purchases of older vintages at auction if everything goes up by 25%.
An importer generally increases her price to at least 33% over her cost. The importer pays all duties and fees associated with the shipment. Then she sells to the wholesaler at the price x. Those duties will be passed on to the wholesaler and then on to the retailer and ultimately to the consumer. So take a $5 bottle of wine for example.
$5 EX Cellar
X 33% importers margin $6.55
X 25% tariff $8.31
X 33% cost to wholesaler / distributor $8.31
X 33% cost to retailer $11.05
X 33% minimum cost to consumer. $14.70
I used 33% because we still have a number of control states which controls the price to the wholesaler, retailer, and state minimum to the customer. Ohio for example is a mandatory 33% mark up plus tax at every stage For state minimums pricing.
On food products because they are not regulated by the states LCB, you can cut out some of the middleman but it’s still going to increase the price to the end consumer tremendously. I will need to go back and reprice everything!
That means you’ll have but no choice to buy your Riesling from me next season! ![[dance-clap.gif]](/uploads/db3686/original/2X/8/835ce082e2fa9c96c4b7f96406bf6e9a0db882ff.gif "[dance-clap.gif]"){kind=small}
Honestly, maybe our president should read up on basic economics, especially Mercantilism. And why that didn’t work so well.
Will be good for Australia’s wine exports and industry, so I guess I should be pleased, but increased global trade barriers can only have a detrimental effect on the broader global economy if the economics they taught me at Uni many moons ago is correct.
Should I have concerns about price changes on '16 Bordeaux future that are paid for but still in France ?
If each tier takes its normal margin, it doesn’t matter to the end consumer. But as has been said, there will probably be some minor absorption of the additional cost, so maybe we’ll see some wines at less than the 25% increase retail.
I don’t think it’s political to say how ridiculous it is to think you are punishing an exporter when you end up punishing the importer and end consumers just as much - or more.
that is a great question. I have a ton of 2018 futures waiting too. One would think that when you bought your futures, your price was fixed, so its up to the retailers and everyone else up the value chain to sort that one out. I am assuming that since I paid a fixed price for my EPs, its up to the retailer to deliver. I don’t know how it works as between my retailer and their supplier…
Yup.
Yup. If they haven’t entered the country by Oct. 15, the tariff will have to be paid.
Except that these things never are fully passed along, for the reasons above. Only if demand were inelastic would it be passed along 100%.
I think if you read the fine print, you’ll see that they can pass on duties, taxes, etc. imposed later. You have less leverage pricewise than the person who’s not in a contract, where the retailer/distributor/importer will likely part of it.
Please correct me if I’m wrong about this; it’s entirely possible.
Looking at the latest Harmonized US Tariff Schedule, Heading/Subheading 2204.21.50 puts a tariff of 6.3 cents/litre on “other” (not sparkling, not tokay, not marsala, etc.) wines in containers smaller than 2 litres and valued over $1.05/litre. That seems to cover most of the bottles we would be concerned with on this forum. Does this annoucement not mean that this existing tariff of 6.3 cents/litre will rise by 25% - to 7.875 cents? If so, is that not negligible in the larger scheme of things?
Don’t forget that the WTO will also make a judgement in around 8 months whether USA subsidized Boing.
Thank you for posting this- you have done a great thing John. I am surely not the only person who did not see this coming and who is facing a pretty material personal impact potentially. I have a couple of questions please for anyone with expertise in this realm,
-
I assume this applies to secondary market as well, correct? For example, a UK broker selling old French wine that is to be imported to the US- the tariff will apply?
-
What is the point/date in the delivery process where the tariff is assessed? For example, if someone had several cases of old French wine coming to the US from the UK, would the tariff be assessed based on the actual date the product left the UK, or the date it arrived on US shores?
Reading the articles, and between the lines, I am hopeful this will not be implemented, but given the implications one is wise to plan and move quickly as needed.
Simple: thanks to everybody who voted for Trump …
Pretty easy to figure out. I can’t spell it out because of guidelines. But it fairly obvious.
Given his participation in the other forum, I’m thinking Dennis knows that - and thus his question is rhetorical.