The Trouble with Tribbles, Tariffs, & Wine

May 28, 2025 By Mike Veseth in economic crisis, Economic impact, EU wine market reforms, trade policy, wine Leave a comment

The Trouble with Tribbles, if you remember your Star Trek history, is that they are adorable. People fall in love with the fuzzy little creatures. But Tribbles multiply like crazy, and pretty soon the place is overrun with them.

Tariffs are not very much like Tribbles, to be honest, but they do have a few things in common right now. First, some people are really in love with tariffs to the point where just saying the word seems to make them feel good.

But, a bit like Tribbles, tariffs tend to multiply both because one tariff often calls for another (did you see the Liberation Day list of tariffs that included some countries that barely exist?) and because of tit-for-tat responses. Tariffs beget tariffs, and pretty soon things can get out of control.

Get Specific!

Tariffs are also like Tribbles in that they really gum up the works and make the economic system less efficient in both creating jobs and meeting consumer needs. To see this, suppose that the government has a specific goal, such as to create jobs in the auto industry. It may or may not be a good idea for government to step in here because anything it does will introduce a distortion. But assume there is a good case for intervention. What’s the best approach?

As an economist, I favor something I call the “specificity rule,” which holds that the best policy is the one that most specifically targets the problem and so introduces the fewest distortions into the system. In the auto worker case, training programs to develop skills and specific investment incentives would make sense. Stimulus to purchase new autos would help, but would be less efficient because they would subsidize existing jobs as well as any new ones created. A tariff on imported cars would create additional unnecessary inefficiencies as well as shrink the car market overall by raising prices. That’s bad. A tariff on all imported products would depress overall demand and do little for the auto workers.

I hope the specificity rule makes sense. Specific solutions are often slower to implement and often require targeted expenditures, but are better in terms of losses in efficiency, growth, and consumer benefits. All policies have a cost that’s either paid through taxes to fund programs or higher costs and prices (or sometimes both) on producers and consumers. Keeping the total cost low and distortions minimized while achieving results is the goal.

Uneven Field

What does this have to do with wine? Well, the global wine industry is in a slump right now, and winegrowers around the world are suffering with low prices, reduced demand, and acres and acres of surplus fruit. Because wine is an important industry in many countries, governments are supplying aid in order to stabilize agricultural incomes, facilitate adjustment to different land uses, and promote wine sales, especially in export markets.

You can argue whether this aid is a good idea or not, but much of it (especially the adjustment assistance) more or less adheres to the specificity rule. The policies are focused on the intended results.

Wine is an important industry here in the United States, too, but government policies to stabilize, adjust, and promote are much less forthcoming here, which creates, as many have noted, an uneven playing field for U.S. wine and winegrape growing. To a certain extent, U.S. growers bear a part of the burden of foreign adjustment. They would be justified in seeking similar specific assistance to better balance competitive forces.

Darn Tribbles!

Enter the Tariff Tribble. The chances of securing the targeted aid that American winegrape growers need seem very low in the current environment. (Indeed, this applies to agriculture generally, much of which has already been harmed by foreign reaction to American tariffs.) If more effective, specific assistance is not available, then it is understandable that some in the wine industry would turn to embrace tariffs.

But tariffs are the wrong solution to the problem because they cause collateral damage, invite retaliation, and, by raising prices, act to shrink the wine market and squeeze distribution generally.

Darn Tribbles. So lovable. But they can love you to death if you are not careful.

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Can’t resist including a scene from the original Star Trek episolde. Reminds me of how much tariffs and Tribbles have in common!

Tenuta Licinia: In Praise of Philosophers & their Wines

May 22, 2025 By Mike Veseth in Italian wine, wine, wine markets 1 Comment

If you flip to the back of my 2017 book Around the World in Eighty Wines, you’ll find a list of the wines from my global adventures. I didn’t want to just list them alphabetically or sort by price or critic rating. Organizing them by country of origin didn’t seem right, either. So I invented categories that would link wines with similar characteristics.

The Joy of Lists

The first category, “Wines of the People,” includes Two Buck Chuck, Mateus Rosé, Mouton Cadet Rouge, and Four Cousins Sweet Rosé from South Africa, among others. These are very different wines united by their popular appeal and market success. Do you see the connection?

Next up is “Noble Wines,” and it starts with Chateau Petrus and continues with Henschke’s “Hill of Grace” from Australia and several others. You can probably think of the wines that you’d add to the Noble list. I admit the lists are totally subjective. I’d probably include different wines today. That’s part of the joy of wine (and of lists).

One of my favorite groups is called “Philosopher Wines.” Sometimes we encounter wines that demand more attention than others and provoke a certain amount of introspection, too. You don’t drink them so much as contemplate them. And we are sad when the glass is finally empty.

Philosopher vs Philosopher’s

These are the “Philosopher Wines” and just reading the list (which starts with a 100-year-old Tawny from Seppeltsfield in Australia and ends with Methode Ancienne Cabernet Sauvignon from Springfield Estate in South Africa) gives me a special feeling.

I don’t plan to revise or update my 80-wine journey but, if I were to update the list, I think I’d have to add a new category. In addition to “Philosopher Wines” I’d have “Philosopher’s Wine,” wines made by philosophers. I’ll bet there are more than a few (didn’t Warren Winiarski of Stag’s Leap Wine Cellars study political philosophy at the University of Chicago before he went down the wine rabbit hole?).

This thought is provoked by an online tasting of Tenuta Licinia wines that Sue and I took part in a few weeks ago. Tenuta Licinia is a small (6.5 hectares of vineyards) winery in a part of Tuscany that doesn’t get too much attention. This particular area near Lucignano had a long history of wine that faded in the 20th Century. Now it is coming back.

A Certain Idea of Wine

The project started about 50 years ago as the personal mission of Jacques de Liedekerke, a prominent Belgian attorney. He recognized the potential of certain vineyard plots in the region and, over 20 years, slowly brought them back to life. His vineyards and his mission eventually passed to his grandson, James Marshall, who, like Winiarski, has followed a path from the serious study of philosophy to the serious study of viticulture and enology.

Talking with Marshall via Zoom reminded me (in a good way, I want to point out) of any number of conversations I have had with philosophers during my academic years. There were thoughtful pauses and occasional clouds of self-doubt mixed with sure statements of principle and intent.

Marshall has for sure a certain idea of wine (to paraphrase Charles De Gaulle), which is based on particular sites with their aspects and soil profiles and particular grape varieties and getting the combinations just right. Winemakers, like philosophers, need to have strong principles that they constantly question, I guess.

Marshall has a number of provocative ideas about wine and one that I like a lot is that his wines should be so good that they appeal to novices, people who don’t know much about wine or don’t have much experience with it. This struck me as odd at first because we normally think of novices as having simple tastes that need to be developed over time to appreciate the best wine.

The Magic Words

But then he said the magic words, Chateau d’Yquem. D’Yquem is widely recognized as one of the world’s greatest wines (indeed, it is often named the world’s best). Yet, Marshall noted, it is immediately appealing to both experts and rookies. His goal isn’t to make a Tuscan d’Yquem, but to make wines as delicious and appealing in their own ways as d’Yquem is in its way.

We were lucky to receive four wines to sample. The Tenuta Licinia Montepolli (named for the vineyard) is an IGT Toscana blend of Merlot and Petit Verdot that was elegant and delicious. The IGT Toscana Sasso di Fato, a blend of Cabernet Sauvignon, Cabernet Franc, and Petit Verdot, was complex, elegant, and memorable. One of the best wines of the year so far. Both wines were light and bright and refreshing, but serious at their core.

Sue and I agreed that the wines did not especially remind us of their component grape varieties. They tasted like … well, I guess they tasted of the place more than the grape and, if this is true, it reflects Marshall’s intent and his attention to detail.

The Petit Verdot Question

We also received half bottles of varietal Cabernet Franc and Sangiovese and we are working on a sampling strategy for them. But the wine that I would love to taste is the 100% Petit Verdot Sasso di Licinia because Marshall brought it up so often in the Zoom interview.

He really doesn’t like the Petit Verdot, he said a couple of times. Wrong grape, wrong place. Subsoils not exactly right. Not what he wants to do. But it is really good with the local Tuscan steak and in fact a neighborhood restaurant wants him to put some in bag-in-box for by-the-glass sales, which makes sense. Marshall really doesn’t like the idea of bag-in-box any more than he likes the Petit Verdot itself, but the wine is really nice with the steak. That’s a fact. So maybe he should do it.

And so on, around and around. Maybe yes, maybe no. It’s kind of fun to turn it over in your mind and see where you come out. Oh, philosophers, you are so interesting! And some of you make really good wine. I’d love to hear from other philosopher winemakers in the comments section.

Don Melchor & Chile’s Good Value Curse

May 20, 2025 By Mike Veseth in Chilean wines, economic crisis, trade wars, wine, wine markets 4 Comments

Sue and I have been looking for the right excuse to open a bottle of Don Melchor, the famous Chilean Cabernet Sauvignon that was named 2024 Wine of the Year by Wine Spectator magazine. Finally, we decided that the act of pulling the cork was excuse enough, and we enjoyed the wine with a nice steak.

Don Melchor is the flagship winery of Concha y Toro, one of the world’s most respected wine producers. The wine was world class, balanced and elegant, and paired perfectly with a dry-aged steak. I admit that I don’t really know what it means to be “wine of the year,” but this wine (and everyone who helped make it) deserves whatever recognition they receive. Bravo!

Message in a Bottle?

You would think that the year’s top wine could be the wine with the highest score, but if you pay attention to these things, you have already noticed that, while all the highlighted wines have high scores, the final rankings are not simply by the numbers.

Sometimes, it seems to me, the people who put together Top 10 or Top 100 lists (and not just Wine Spectator) want to send a message. Sometimes it is to highlight particular regions or to balance Old World and New World recognition. In 2009, in the aftermath of the global financial crisis, for example, a Reserve Cabernet Sauvignon from Columbia Crest was Wine Spectator’s top wine. It was an excellent wine (a friend opened a bottle for us last year), but I think it was chosen in part to send a message that excellent wines didn’t have to cost a fortune (the release price of the Columbia Crest was just $27) or come from Bordeaux or Napa, either.

In the same way, I suspect that the Don Melchor was chosen at least in part to draw attention to Chile’s excellent wines and the fact that they can command high prices. (The Don Melchor we enjoyed was an editorial sample, but the local Total Wine has it in stock for $140.) Chilean wines have long been filed under “good value,” which is much better than a “bad value” label that some other regions have earned. But I think many producers see good value as a barrier to their quest for higher status. The Wine Spectator award helped in this regard, and the Don Melchor wine has the quality to make the label stick, if you know what I mean.

The Good Value Curse

You can see the good value curse in the numbers. U.S. wine market data in the most recent issue of Wine Business Monthly put the average bottle-equivalent price for Chilean wine at $5.04 for the previous 12 months, lower than the import average of $9.66 and even lower than Australia’s $5.49.

Not surprisingly, measured U.S. sales of Chilean wine are down with the rest of the market, falling 3.6% by volume and 0.3% by value. (These declines are actually less than the overall market’s decline.)

Chile is more dependent on export markets than most other major producing countries, so wine market contractions in the U.S., U.K., and perhaps especially China have been a major blow. Factor in the uncertainty caused by the Trump tariffs and the list of Chilean wine’s challenges grows.

It is, therefore shocking, but perhaps not surprising to see this graph from the OIV database, which shows that the vineyard area in Chile has quite suddenly declined back to levels last seen at the turn of the century. Wine grapes are unprofitable, especially in the O’Higgins region, according to a Department of Agriculture report. Growers are shifting to cherries, citrus, and other crops with better prospects and margins.

Quality and Diversity

Sue and I have sampled many Chilean wines and we have been impressed by both the surprising diversity of wine types and styles and the steady rise in quality. The challenge, or perhaps one of the challenges, is to bring the best of Chile’s wine into sharper focus for consumers who confront a dazzling array of wine choices. Not an easy task, especially in this market environment.

Don Melchor has a role to play here as a sort of beacon to draw consumers closer to the world of quality Chilean wines.

Wine & the Trump Tariffs: A Cloudy Crystal Ball

May 13, 2025 By Mike Veseth in economic crisis, Economic impact, trade policy, trade wars, wine, wine markets Leave a comment

I’ve received emails asking me to write about the Trump tariff regime (and other policies) and how they will affect the wine industry. I have resisted so far because there is not enough information on which to base an argument or opinion. There is lots of speculation, but not yet much solid fact.

Beyond Speculation?

“Wine and the Age of Uncertainty” was the title of my remarks at the State of the Industry session at this year’s Unified Wine & Grape Symposium (which I previewed on The Wine Economist a few weeks before the event). Uncertainty is a constant factor in agriculture in general and wine in particular, I argued, but 2025 is different because there are so many unknowns to consider.

I illustrated this point with the slide above. Looking narrowly at the trade situation, there are lots of questions that need answers in order to get beyond speculation. I highlighted a few of the most important ones in red. None of the questions had firm answers back in January and they still don’t today.

So uncertainty prevails in the realm of “known unknowns,” which are the things that you know you don’t know. And that doesn’t even consider the bigger domain of “unknown unknowns,” which are the things you don’t know you don’t know (but should).

They say that what you don’t know can’t hurt you, but what you don’t know you don’t know can bite you in the butt.

The View from Abroad

How are foreign producers reacting to this unstable trade environment? No surprise, considering all the unknowns, there is no single dominant strategy. A common tactic, both in wine and more generally, has been to get as many products into the country as possible before full tariffs kick in. This will keep the distribution pipeline going at least for a while. It is not a permanent solution, but no one knows what the next step in trade policy might be. Maybe the tariffs will disappear as quickly as they appeared? An import surge buys time even if it comes at a cost.

Sue and I were in Spain last month and we encountered two very different reactions from producers there. Some accepted the fact of tariffs, but were relieved that they would be 10% instead of the 120% rates previously threatened. We can live with 10%, they said, and they are working out the appropriate business model for these circumstances. The wine industry has lots of problems (see below) and a 10% U.S. tariff is not the most serious of them. Ten percent is the new zero, as some have said, and many accept that so long as they can be sure that that’s what will prevail.

But not everyone agrees with this sentiment. We talked to one producer who said his firm was walking away from the U.S. market. Ten percent, 100 percent, 20 percent, what next? The uncertainty is simply too great to justify long-term investment. There are other markets where the risk-reward equation has a better balance.

Zero-Sum Solution?

Several European producers asked if the tariffs were benefiting U.S. wine producers. That’s a natural question if you think about tariffs and trade as a zero-sum game, where my loss is your gain. But in fact wine seems to be a negative-sum game at the moment as the global industry adjusts to a new normal. Demographic shifts do not favor alcoholic beverages generally. Neither do health concerns.

Economic uncertainty is undermining demand for many categories of luxury goods (and wine, for most people, is more affordable luxury than basic necessity). The threat of tariffs only serves to make the situation worse by raising costs and shrinking the already narrow distribution channel.

One way to think about the situation is in terms of what I call “pie economics.” What’s happening to the market pie? Is it growing or shrinking? What’s happening to your share of the pie? Is it getting bigger or smaller?

When markets are growing, distribution issues are often less important. The growing pie can make up for any small cut in your share. But when the pie is shrinking, the dominant strategy is to focus on share. That’s when zero-sum thinking kicks in. But in the case of tariffs, it is really a negative-sum game because higher import costs can sometimes shrink the pie so much that no one is better off.

The wine market pie was already shrinking, of course, so tariffs just make things worse. How it will turn out, and if anyone will be a winner, is still not clear.

So, wine and tariffs? My crystal ball’s all steamed up. Can’t see a thing. How about yours?

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Some say that economics is the “science of unintended consequences” and a recent Financial Times article bears this out in the case of the Trump tariffs. One of the potential winners of the current trade war, according to the article, might be Vinarchy, which was created when Australia’s Accolade Wines merged with Pernod Ricard’s wine operations to create te world’s second largest specialist wine producer.

Vinarchy’s brands will be subject to tariffs on U.S. sales like everyone else, which is not good news. But the anti-American wine sentiment that the Trump tariffs have stirred up might create opportunities, too. They see openings for Jacob’s Creek in Canada, for example, and Campo Viejo in Mexico and the rest of Latin America, for example, as consumers look for alternatives to California wine.