French wine-makers are increasingly concerned about Donald Trump’s threats to introduce high tariffs on French wine in retaliation for Emmanuel Macron’s tax on global technology companies, as world leaders gather for the Biarritz G7 summit this weekend.
A new front in Trump’s international trade wars could open up across France’s vineyards, damaging the livelihoods and jobs of small producers, if the US president decides to substantially increase tariffs on French wine as punishment for what he has called the “foolishness” of the new levy on the annual revenues of technology companies.
Meeting regularly since 1976, the G7 is made up of seven countries: Canada, France, Germany, Italy, Japan, the UK and the US. Between them, the countries represent around half of the world’s GDP, and the group’s main purpose is to provide a forum for discussing world economic stability. The first meetings grew out of a series of summits to deal with the 1973 oil crisis.
G7 summits take place annually, with the host nation rotating between the members. Summits are usually attended by leaders, finance ministers and central bank governors. As well as the seven nations, the meetings are also usually attended by leaders from the European Union, and representatives from international financial institutions including the International Monetary Fund and the World Bank. As well as the high-profile summits, the finance ministers from the G7 also meet on a regular basis several times a year.
Between 1998 and 2014 the grouping was known as the G8, and also included Russia among its members. However, Russia was expelled in 2014 following the annexation of Crimea.
Martin Belam
Although alcohol has no connection to Macron’s drive to make companies including Google, Amazon, Facebook and Apple pay more and “fairer” tax, French wine is seen as a symbolic target by Trump. The US president sees the tech tax as attacking US companies and wants to retaliate, although France argues the tax is aimed at all tech firms, not just American ones.
Trump began tweeting furiously about French wine last November, while attacking Macron over nationalism and world wars. He said of France’s own tariffs on imported wine, which are set by the EU: “Not fair, must change!”
Last month he ramped up threats to hit French wine directly, tweeting that he would soon announce a “substantial reciprocal action” on what he called Macron’s “foolishness” over the technology tax. He added: “I’ve always said American wine is better than French wine!”
France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!
— Donald J. Trump (@realDonaldTrump) July 26, 2019
This month Bloomberg reported that Trump had floated the idea of going as far as putting a 100% tax on French wines at a business roundtable in the Hamptons.
Trump is a proud teetotaller, but he recently told reporters he had “always liked American wines better than French wines even though I don’t drink”. He explained why: “I just like the way they look.”
His tweets prompted the inevitable joke in France: “Make America grape again.”
France is a major wine-producing nation and the US is its biggest export market in value terms, accounting for 18% of French wine exports and worth €1.7bn (£1.5bn), up almost a third over the past five years. Wine is a crucial part of France’s identity and economy – its second-biggest export after aerospace in value terms.
American tariffs could prove hugely damaging to the many small French wine producers whose middle-market products sell for affordable prices in the US, particularly rosé wine, which is increasingly popular. Producers of the more expensive and exclusive “grands crus” vintage wines would likely be able to compensate elsewhere.
But small French producers, already concerned about difficulties in exporting to the UK after Brexit, are hoping the row can be contained at the G7 summit in Biarritz. They have seen how the high tariffs Trump put on Spanish olives hit farmers in Andalucía.
“We’re extremely concerned, it’s a worrying situation, you can’t deny it,” said Marcel Perinet, a small organic and natural wine-maker in south-eastern France who makes sparkling rosé and exports 40% to the US and Canada.
He previously worked in the restaurant business and said he remembered a row in 2003 when France did not support the US-led war in Iraq and some French wines were poured down drains in protest. “I lived through the impact of anti-French wine feeling in 2003 – it sorted itself out eventually but it was costly for a while,” he said.
Perinet said he had begun diversifying into different Asian markets to prepare and his US importer was already stocking up by ordering in more French wine in anticipation of a possible tariff rise. “So far this year I’ve exported more volume to the US because of people stocking up,” Perinet said. “But I’m worried.”
Thomas Montagne, the head of the European Confederation of Independent Winegrowers, is a producer in the Luberon, southern France. He said: “Clearly we’re concerned all across France. The US is our first market in terms of value, and the UK, which is our second, is also facing uncertainty over Brexit.”
He said people working in agriculture – including wine-makers – did not want to be “hostages” to politics any longer. Small producers account for 55% of the French wine harvest, and stood to lose the most, he said.
The French Federation of Wine and Spirit Exporters said it was “extremely vigilant” and urged the US and France to find a way to stop Trump’s threats being put into action.
Last month, the French agriculture minister called Trump’s rationale in hitting French wine “completely moronic”.
Macron stood by his technology tax this week, saying the current “crazy” system under which tech companies were able to book profits in low-tax countries, no matter where the revenue came from, gave them “permanent tax haven status”.
France’s levy of 3% on the total annual revenues of the largest tech companies providing services to French consumers is not specifically aimed at US companies, but the big four of Google, Apple, Facebook and Amazon are the highest profile.
