Study Reveals U.S. Consumers Bear Cost of Wine Tariffs

A recent study from Duke University’s Department of Economics has found that U.S. consumers paid more than the actual tariff costs on European wines during the trade dispute from 2019 to 2021. This finding suggests that American consumers will continue to face higher prices due to new tariffs being imposed globally.

The study indicates that while the federal government collected tariff revenues, the burden ultimately fell on consumers. According to Felix Tintelnot, an associate professor of economics at Duke, “Our findings contain both good and bad news for the American consumer. The good news is that consumer prices for imported wines rose by less than the percentage increase in the tariff. The bad news is that our estimates suggest consumer cost increases exceeded the tariff revenue received by the U.S. government.”

The research, published by the National Bureau of Economic Research, analyzed public and private data from a major wine importer. During the period in question, foreign wine producers lowered prices by approximately 5.2% in response to a 25% tariff on wines with 14% alcohol content or below. Despite this reduction, American consumers did not benefit from lower prices. Instead, U.S. importers raised their prices to distributors by around 5.4%, passing some of the tariff burden onto consumers.

As a result, retail prices for imported wines increased by 6.9%. By the time the bottles reached consumers, the average cost was about $1.59 more per bottle than before the tariffs, surpassing the $1.19 tariff paid at the border. Tintelnot emphasized, “What consumers paid more per bottle exceeded what the government took in.”

Former President Donald Trump and his administration previously asserted that tariffs would not lead to higher consumer prices, claiming that foreign nations would bear the costs. However, the findings of this study contradict that narrative. The recent tariffs imposed by Trump on various goods, including wines, steel, and automobiles, have raised costs for consumers across the board.

The study’s scope was limited to wine, but the implications may extend to other sectors affected by tariffs. Tintelnot noted that while the wine tariffs only impacted certain countries and types of wine, they still provided valuable insights. The research revealed that not only consumers bore the brunt of the price increases; nearly every stakeholder in the supply chain faced financial strain. Importers experienced squeezed margins, and despite producers cutting prices, American consumers continued to pay more.

A report from Goldman Sachs aligns with these findings, estimating that U.S. consumers will shoulder roughly 55% of the total costs associated with Trump’s tariffs. Meanwhile, U.S. businesses are expected to account for 22%, and foreign exporters for 18%.

Additionally, the study uncovered a phenomenon known as tariff engineering. This practice involves making slight modifications to products or their labels to evade tariffs. Tintelnot observed significant changes in wine labeling, as many wines that were previously classified as below 14%% alcohol were reclassified to avoid tariffs.

Interestingly, the study also highlighted a delayed reaction in price adjustments. It took nearly a year for retail prices to reflect the removal of tariffs, and prices did not decrease immediately upon the lifting of tariffs. Tintelnot explained, “It took around three months until the importer renegotiated prices with the exporter, and then also to raise prices to the U.S. What’s interesting is they don’t go down right away when the tariffs go away. In fact, they stayed elevated for another year after the tariffs were removed.”

These findings provide critical insights into the impact of tariffs on consumer prices and highlight the complexity of international trade policies. As new tariffs emerge, American consumers may continue to face increased costs, raising questions about the long-term effects of such economic strategies.