Pass-Through of Tariffs: Evidence from European Wine Imports

7 hours ago

The study examines how tariff costs propagate through the wine distribution chain, from foreign producers to US importers, distributors, and retail consumers.
US tariffs of 25% were imposed on European wines (≤14% ABV) from France, Germany, Spain, and the UK from October 2019 to March 2021 due to the Airbus-Boeing dispute.
Foreign producers absorbed about 20% of the tariff by reducing pre-tariff prices by 5.2%, while the remaining 80% was passed to US importers.
Importers raised prices to distributors by 5.4%, but their margins declined by $0.44 per bottle due to higher costs.
Distributors and retailers applied markups (~75% and ~50%, respectively), leading to a 6.9% increase in retail prices, exceeding the tariff revenue collected.
Price adjustments occurred gradually: import prices changed within 3 months, while retail prices took ~12 months to fully reflect the tariff impact.
Tariff avoidance strategies emerged, such as shifting product offerings to higher ABV wines (>14%) or modifying listed alcohol content to qualify for exemptions.
In France, label approvals for wines switching from ≤14% to >14% ABV increased by nearly 10 percentage points post-tariff implementation.
Aggregate trade statistics underestimated actual pass-through rates due to compositional shifts in product offerings.

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