It is cold comfort for U.S. winegrowers, producers, distributors, and retailers, but they are not alone in suffering a cascade of wine market woes. Recent reports from Italy, for example, paint an increasingly clear picture of a major wine-producing country in crisis.

UIV Analysis Focuses on Exports

The Unione Italiana Vini, which has more than 800 members and accounts for 85% of Italian wine exports, has been “the voice of Italian wine” since 1895. Recently that voice has sounded an alarm. A June 2025 press release focused on falling export demand for Italian wine. Italy’s domestic market for wine is large, of course, but production is very much larger, so many regions depend critically on export sales. Exports account for 63% of total sales in Piedmont, for example, 59.5% in  Tuscany, and 58.7% in  Abruzzo.

The U.S. is Italy’s biggest export market, so you can imagine that President Trump’s “Liberation Day” tariff announcements were not welcome news in Italy. As the UIV chart above shows, there was a surge of shipments to the U.S. in the first two months of 2025 as exports were accelerated in an attempt to build inventories before the tariffs went into force (Italy was not the only wine country to use this strategy). Then exports to the U.S. fell sharply in terms of both volume and value.

With substantial stocks in U.S. warehouses and unfavorable tariff and exchange rate conditions, the prospect of improved exports to the U.S. market for the rest of the year is not bright. And all this was driven by uncertainty about U.S. policy as the final tariff rate was not yet determined.

Trouble Beyond the U.S. Market

A second recent press release presented even more disturbing news.

The imbalance between potential output and market demand was highlighted in a report presented today by UIV’s Observatory, led by Carlo Flamini. Data from the first five months of 2025 show volume declines across Italy’s top four export markets: Italy (-1.8%), U.S. (-4.7%), UK (-3%), and Germany (-9.6%). These countries collectively account for 73% of Italian wine revenues. Overall retail sales are down 3.4%, with still and sparkling wines falling 5.3%. Only spumante bucked the trend, growing 4.9%. Despite the downturn, Italy remains the only major wine-producing country expanding its vineyard area – a growth that risks worsening oversupply.

Italy has been fortunate to experience several short harvests in recent years, which have masked the large structural wine surplus that is now impossible to ignore. What is to be done?

Internal and External Adjustment

One strategy is to focus on export markets by negotiating lower tariffs and reduced trade barriers generally. But, as the press release suggests, it would be all but impossible to replace lost U.S. sales by shifting focus to other markets. Some attractive non-EU export markets (think Brazil) have tariff barriers (27%) even higher than the 10% or 20% rates often discussed for the U.S.  Border adjustments won’t solve Italy’s problems. Internal reforms are needed.

Here is the UIV’s agenda.

• UIV is urging immediate structural changes to balance supply and demand. Key proposals include:
  • Lowering grape yields per hectare, including ending exemptions for generic wines.
  • Aligning DOC (controlled designation of origin) production limits with actual 5-year averages.
  • Reducing or eliminating the 20% overproduction allowance for DOC wines.
  • Revising reclassification mechanisms and accelerating production management tools.
  • Freezing new planting authorizations for one year.
• UIV is also calling for a major reorganization of Italy’s appellation system. Although 529 DOC/IGT labels are officially recognized, just 20 account for 80% of national production.

There are two things to note on this reform agenda. The first is that it sensibly addresses the market surplus from both supply and demand perspectives. Fewer grapes and less wine should be produced on the supply side. And changes should be made to make the wine easier to understand and more consumer-friendly on the demand side.

Too Many Cheeses?

I especially support the movement to reduce the kaleidoscopic blur of regional designations. Charles de Gaulle famously said that it is impossible to govern a nation with 246 different kinds of cheese. Strong local identity isn’t always easily aligned with national purpose.

Italy is learning that having 529 regional wine identities can be a problem, too. (A lesson that might apply here in the U.S. as well.)

The second thing I would like you to note is that the reform agenda focuses on regulation, which is the way that Old World wine sectors tend to view things.  Sometimes I think that the most important difference between Old World and New World is whether responsibility for change is located in the public or the private sector. (In this way of thinking many New World wine countries belong in the Old World.)

In any case, I agree that Italy’s current problems are due in part to the regulatory structure, which has sometimes aimed to protect producers from market forces rather than channeling those forces productively. So the UIV’s proposals for reform are appropriate. The question is, will they be implemented and then will they succeed?

Existential Threat?

The situation worsened last week when U.S. President Donald Trump threatened 30% tariffs on EU products including wine, an increase from the 20%, then 10%, then maybe 17% rates suggested earlier this year. The fact thast the dollar has fallen in value substantially against the euro this year magnifies the dilemma by increasing the cost of European wines to U.S. buyers regardless of the tariff rate.

The term “existential threat” is thrown around too casualy these days but it may perhaps apply to the Italian wine industry today. Here is the UIV response to the 30% tariff threat.

Rome, July 12, 2025 – “It took just one letter to write the darkest page in the history of relations between two long-standing Western allies. A 30% tariff on wine, if confirmed, would amount to a near-embargo on 80% of Italian wine exports. At this point, the fate of our industry – and hundreds of thousands of jobs – hangs on what could be considered extra time, which will prove crucial. It’s unrealistic to think such volumes can be redirected elsewhere in the short term. At the same time, an extraordinary intervention from the EU will be absolutely necessary.” This was the stark warning issued by Lamberto Frescobaldi, President of Unione Italiana Vini (UIV), following the Trump administration’s announcement – delivered in a formal letter – of additional 30% tariffs on European Union wine imports, set to take effect on August 1.

Italian Prime Minister Georgia Meloni is sometimes said to be a “Trump whisperer,” able to talk sense to the U.S. President. I am sure Italy’s wine sector is hoping she will succeed in her efforts so that they can move ahead with their necessary reforms.