Tariffs to hit wine, fashion industries hard

Proposed tariffs will mean soaring costs for many small businesses including clothing designers, wine distributors

What you probably already know: Many industries are bracing themselves for the impact of tariffs after President-elect Donald Trump takes office, but two industries, in particular, are expecting to take a big hit: Wine and fashion. While the concept behind tariffs is to drive more manufacturing here in the U.S., there are some industries that have nearly no production facilities here and thus, no where for retailers to turn. As a result, costs will simply rise for American consumers. Trump has talked about 10 to 20% tariffs on foreign products and 60% on Chinese-made goods. For wine-makers, that means bottles and labels are about to get significantly more expensive, and distributors will pay more to bring in French and Italian wines. Meanwhile, fashion designers are already scrambling to identify non-Chinese facilities that can produce their goods.

Why? While the tariffs will impact businesses across these industries, they will have a more significant impact on the smaller producers and retailers who aren’t able to order in bulk. Those same organizations are often operating with very small profit margins if they’re profitable at all. A report in the New York Times took a look at how tariffs would impact wine distributers and retail operations, many of which are small, family-owned operations, and found that tariffs on European-made wines wouldn’t really impact European wineries much — the tariffs would simply result in importers and distributors having to eat the costs. And it won’t make American wines any cheaper. The same is true with clothing designers, who work hard to establish relationships with manufacturers that can produce high-end clothing. Establishing new relationships with manufacturers in other countries can take years and result in quality changes.

What it means: If the quality of a product, like a sweater, goes down or access to a product like a French-made wine disappears, consumers don’t stop buying sweaters or wine. They just buy from different outlets, often larger corporations that can afford to eat the cost of the tariffs. Meanwhile, early reports suggest the steep tariffs Trump has proposed could actually help the Chinese economy, as it could drive more consumer spending inside the country, something that has stagnated in recent years.

What happens now? Tariffs on goods from other countries are essentially taxes on Americans, and the Tax Foundation estimated that the Trump tariffs, combined with Biden’s decision to keep the majority of those tariffs in place and add some more on electric vehicles and semiconductors, has resulted in $80 billion in new taxes — or about $200-300 per year per household — and a reduction of GDP by 0.2%. That, the group estimates, will already cost about 142,000 U.S. jobs. The additional tariffs proposed, and the resulting trade war, would result in an estimated 0.8% drop in GDP and cost the U.S. about 684,000 jobs.