A 10% tariff on imported wine sounds manageable. Absorb a little margin here, adjust pricing there — business as usual. Except it's not 10% by the time it reaches the shelf. Run that tariff through the three-tier system and the math gets uncomfortable fast.
Distributors typically mark up 25–33%. Retailers add another 30–50%. Because those markups are percentage-based, they don't just add the tariff cost — they multiply it. A 10% tariff at the border can translate to a 15–20% price increase at the shelf. A landmark NBER study on the 2019 European wine tariffs confirmed the mechanics: consumers ended up paying more in additional cost than the government collected in tariff revenue [1]. Foreign producers absorbed about 20% of the 25% tariff rate. The remaining 80% was passed forward — and then amplified through each tier's percentage-based markup.
That amplification is the story. Not the tariff itself.
The Pass-Through Problem
In conversations across the industry, the pattern is consistent: costs are being passed through. Some foreign producers are offering discounts to soften the blow, but those are limited and temporary. At the distributor and retailer level, the tariff cost flows downstream because there's no margin left to absorb it.
But here's where it gets complicated. Not everyone passes costs through at the same speed. Some importers adjust pricing within weeks. Others — particularly in franchise states with price posting requirements — can take months. In New York, for example, wholesale price postings are due by the 25th of the month, two months before the month of sale [2]. That's a built-in lag. When tariff rates shift mid-cycle, the posted price is already "wrong" before the product moves.
The result is that at any given moment, different parts of the supply chain are operating on different cost assumptions. Some operators have already priced in the tariff. Others are still selling at pre-tariff margins without realizing it. And almost nobody has visibility into where the discrepancies sit across their network.
A Year In: Business as Usual, But Blurrier
When the first wave of tariffs hit in early 2025 — around Liberation Day — the industry reacted visibly. Importers rushed to bring in inventory ahead of deadlines. Others froze purchasing decisions, waiting for clarity. A year into the volatility, that kind of reactive behavior has largely faded. Nobody is pausing orders anymore. The uncertainty has become the baseline.
But "business as usual" doesn't mean the problem is solved. It means the problem has become structural. US wine exports fell 33.5% in 2025 — from $1.3 billion to $850 million, the first time below $1 billion since 2009 [3]. Exports to Canada alone dropped 78%, a $357 million loss driven almost entirely by tariff retaliation. Meanwhile, the US collected roughly $492 million in wine tariff revenue [4] — nearly equal to what the industry lost in exports.
The current Section 122 tariffs are the latest iteration — a 10% ad valorem duty that took effect February 24, 2026, after the Supreme Court struck down the IEEPA tariffs on February 20 [5]. The rate is lower than what came before. The disruption is not.
The Visibility Gap
This is what makes the tariff situation a supply chain problem, not just a trade policy problem. The three-tier system doesn't just amplify costs — it amplifies the delay in seeing those costs. When you can't see where a tariff is being absorbed versus passed through, when pricing lags reality by months in regulated states, when your suppliers and distributors are all operating on different timelines — you can't make fast, informed decisions.
The NBER researchers found that retail prices took approximately 12 months to fully reflect the 2019 tariffs [1]. A full year of misaligned pricing across the chain. That's not a tariff problem. That's a visibility problem.
The operators who navigate this best won't be the ones with the lowest tariff exposure. They'll be the ones who can actually see what's happening across their supply chain in something closer to real time — and adjust before the math catches up with them.
References
[1] Flaaen, A., Hortacsu, A., Tintelnot, F., Urdaneta, N. & Xu, D. "Who Pays for Tariffs Along the Supply Chain? Evidence from European Wine Tariffs." NBER Working Paper No. 34392. https://www.nber.org/papers/w34392
[2] New York State Liquor Authority. "Price Posting." NY ABC Law, Section 101-b. https://sla.ny.gov/price-posting
[3] US Census Bureau, Annual Trade Data (2025). Reported by Robb Report: "U.S. Wine Exports Plummeted by $428 Million in 2025." https://robbreport.com/food-drink/wine/us-wine-exports-fell-33-percent-1237578978/
[4] American Association of Wine Economists (AAWE), based on US Census Bureau / USA Trade Online data. Reported by VinePair: "U.S. Census Report Shows Wine and Beer Exports Collapsed by $472 Million in 2025." https://vinepair.com/booze-news/census-report-us-alcohol-imports-decline-by-millions/
[5] Learning Resources, Inc. v. Trump, 607 U.S. ___ (2026). Decided February 20, 2026. Section 122 tariff details: Hillebrand Gori, "US Alcohol Import Tariffs and Reciprocal Tariffs Update." https://www.hillebrandgori.com/media/publication/us-alcohol-import-tariffs