News of the trade truce between the United States and European Union last Friday provided an instant fillip to activity on the secondary market, with US members returning in force.
The number of LIVE bids from US merchants on the Exchange soared this weekend and were particularly concentrated on Bordeaux, Burgundy, Champagne and Rhone wines.
That said, although the results were not as immediately eye-catching, demand for Italian wines from US buyers also remained robust and the country’s market share by value remains the largest after Bordeaux’s (see chart above).
The boost in activity was prompted by the news late in the afternoon of Friday 5 March, that the EU and US had agreed a unilateral suspension of the tariffs each polity had placed on various goods in the course of the Boeing-Airbus dispute.
Both entities had accused the other of illegally subsidising their respective aerospace companies. In 2019, with acknowledgment from the World Trade Organisation that the EU had unfairly subsidised Airbus, the US imposed tariffs on a range of EU exports, ranging from tractors to wines and spirits, worth up to US$7.5 billion.
Last year the WTO likewise ruled that the US had illegally subsidised Boeing, paving the way for the EU to impose tariffs of its own on US products, worth approximately US$4bn.
Although the dispute pre-dated President Donald Trump coming to office, his administration’s ‘America First’ policies saw him enthusiastically embrace the introduction of tariffs and relations between the US and EU undoubtedly hit a low during his presidency.
With the election of Joe Biden last November, however, it was hoped the relationship could be repaired and the tariffs abolished, although there were doubts this would be an immediate priority for the new administration.
Events have moved rather faster than expected. In December last year the UK said it was voluntarily suspending its tariffs on US goods, which was reciprocated by the US on Thursday last week.
The following day, US and EU trade officials then announced they had agreed a four month suspension on all of the tariffs that had been imposed since 2019.
Both sides called the decision a “fresh start” and a “reset” of the relationship, with European Trade Commissioner, Valdis Dombrovskis, saying that: “Removing these tariffs is a win-win for bot sides, at a time when the pandemic is hurting our workers and our economies.”
The tariffs have had a singular effect on the fine wine market over the last 18 months, not least for Italy and Champagne whose wines were excluded from the extra 25% levy.
As a result, both regions saw extensive gains in the secondary market, increasing their market share and with improved price performance for many labels. Italy’s share of trade by value in 2020 was its highest-ever.
With the tariffs due to be reviewed by the US and EU in four months time, it will be interesting to see the effect this truce has on trading behaviour in the interim.