Alcohol tariffs would leave a bitter aftertaste, but for how long?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Wine making is no easy business. Global consumption is down 12% from its 2007 peak and Gen Z are set to be the most alcohol-shy generation so far. Shifting weather patterns are creating new growing hotspots, at great cost to others. Now, European vintners face the prospect of 200% tariffs on exports to the US.
How serious a threat is this? Well, Americans are moderate drinkers, but there's a lot of them. The US imported €5.2 billion worth of wine from the EU last year, constituting about a fifth of the bloc's total wine exports. Italy is particularly exposed: 2024 shipments to the US reached nearly €2bn, equating to a quarter of its total wine exports by value.
Clearly, the short-term results would be severe - job losses would run to the thousands, Ignacio Sánchez Recarte, secretary-general of European wine industry body Comité Européen des Entreprises Vins told the BBC. However, who knows if this will go ahead? The president might change his mind. The EU might stop short of implementing its own planned 50% tariff on whiskey.
Understanding the long-term implications of all this is even trickier - the next administration might reverse everything anyway. We are likely to face four years of volatile policymaking, posing challenges for real estate holders across the board. What might all this mean for the market for vineyards, for example?
The fizzy stuff
This uncertainty extends beyond assets, too. The Trump administration has said it won't enforce certain financial rules that are out of favour, but banks are likely to obey them anyway, in part because they might be enforced by the next administration. For long-term holders of financial assets, it might make sense to just look through certain policies - particularly to 2028 and beyond.
We recently took a global vineyard tour for the Wealth Report 2025—see p.40. Insights into which regions might be most resilient to tariffs could be gleaned from examining those that have withstood other major challenges in the sector. The recent Australian experience with 200% Chinese tariffs points to potential vineyard market outcomes.
Prices for the most iconic Burgundy vineyards can still exceed €1 million/ha with no weakening of values. Similarly, the Champagne region, despite pumping out huge volumes of the fizzy stuff each year, also seems immune to the global downturn, with vineyard values nudging up. In Spain, demand is most buoyant for wineries in areas specialising in white wine, like Galicia.
It's worth remembering that US winemakers will also come under pressure from tariffs and policies to deport immigrants who do a lot of the work on vineyards, which will push up production costs. Values for premier Napa vineyards remain stable, but prices in less exalted areas may have fallen by 10% to 30% during 2024. See the report for more.
A modest slowdown
Concerns over interest rates, inflation and geopolitical instability have dampened confidence in the UK housing market, resulting in a modest slowdown in the sales market, according to a new RICS Residential Market Survey. The April 1st stamp duty deadline is also "distorting the underlying demand picture", the group said.
New buyer enquiries series posted a net balance reading of -14% in February - anything below zero represents a contraction. This is down from -1% previously and marks the weakest result since November 2023. The newly agreed sales indicator fell to a net balance reading of -13% compared to +2% beforehand - that's the weakest reading since May 2024. Respondents across London reported a particularly noticeable dip in the volume of sales agreed.
The net balance for near-term sales expectations slipped to -5%, a more cautious signal relative to the modestly positive figure of +9% in the previous iteration of the survey. Sentiment for the next twelve months remains positive, posting a net balance of +32%.
Hugely encouraged
Berkeley this morning reported that sales enquiries "are at a consistently good level" and there has been a "modest improvement in sales reservations".
"For this improvement to continue and sales rates to return closer to the levels of three years ago, there needs to be greater confidence in the trajectory of interest rate reductions and wider economic stability," the company said as it provided a trading update for the period spanning 1st November to 28th February.
The company added that it remained "hugely encouraged by the change in mind-set over planning". A reminder that we covered Persimmon's results on Wednesday.
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