A new NBER working paper examines how US tariffs on European wines affected prices throughout the supply chain. Researchers found that when 25% tariffs were imposed on wines from France, Germany, Spain, and the UK in 2019, foreign producers absorbed only about 20% of the cost by lowering their prices.

Using confidential transaction data from a major US wine importer, the study tracked price changes from foreign producers through importers, distributors, and retailers. The researchers compared tariffed wines (still wines at or below 14% ABV) with control groups like sparkling wines and higher-alcohol still wines. Price adjustments occurred gradually, with import prices changing within three months while retail prices took about 12 months to fully reflect the tariff impact.

The analysis revealed that importers absorbed additional costs despite raising prices to distributors, resulting in lower profit margins per bottle. Retail prices increased by approximately 6.9%, exceeding the tariff revenue collected. The study also documented systematic tariff avoidance, with producers shifting toward higher-alcohol content wines that qualified for exemptions.