California is the first state to sue the Trump administration over tariffs. Gov. Gavin Newsom made the announcement last week on an almond farm in the Central Valley, saying 43% of the state’s almonds, pistachios and dairy products are export dependent.
Newsom says no state is poised to lose more due to the tariffs than California, but not all farmers agree. California winegrape growers and producers like Rodney Schatz hope tariffs can help save the waning wine industry in the state.
“It’s tough now in the fact that the world market really is affecting everything we do. [That’s] on top of the fact that we’re in California where regulations are even more dramatic than most places could even imagine,” Schatz told Farm Journal.
2025 Could Be the Most Challenging Year Yet
Schatz is a third-generation grape grower and wine producer, situated just outside of Lodi, Calif., which is home to nearly 40% of California’s premium wine grape production. He’s been in the business for 50 years and coming off of one of his most challenging years yet.
“This is going to be a very tough summer, because right now there’s no activity by wineries purchasing fruit for this upcoming harvest, which is about five months away,” he adds.
The fact Schatz thinks 2025 could be more severe than 2024 says a lot considering some growers left entire vineyards unharvested last year, as they had no home for their grapes.
“It was probably one of the worst harvests we’ve seen in the last 50 years,” says Stuart Spencer, executive director for the Lodi Wine Grape Commission. “There were an estimated 400 to 500,000 tons of grapes across all of California that went unharvested.”
Spencer estimates 15% of the total crop in California went without a contract in 2024, which means those growers left that crop to either wither on the vine or rot in the field.
“This was the lightest harvest we’ve seen in 20 years, going back to 2004, and a good part of that was because of the unharvested grapes where there was just no market for them,” Spencer says.
Schatz harvested every acre of his grapes last year — a decision he now regrets. And that means he’s already making tough calls for 2025.
“What we’ve done is since harvest last year, we’ve already removed over a hundred acres of vineyard. So, we just took them out,” says Schatz. “And the last piece that’s being kind of considered sits in front of my home ... . I didn’t even prune it, so it’s probably going to come out through the summer as well.”
What’s Causing the Wine Industry to Hit a Wall?
Schatz is trying olives and different crops to diversify, working to weather the current storm. The reason? Well, it’s complex. It goes back to too much supply, not enough demand, non-tariff trade barriers hitting the wine industry especially hard, and a flood of imports.
“A big issue now, being in a world market, there’s wine grapes produced throughout the world and wine coming from all over the world to the United States. That’s going to be our biggest challenge,” says Schatz.
“There’s still a great deal of uncertainty in the marketplace, and then the whole trade tariff discussion has added additional uncertainty to it,” says Spencer.
After 30 years of growth, Spencer says demand for wine has shrunk the last three years. But there’s also a global oversupply of wine from places like Europe, Australia and South America.
“Consequently, that’s left a lot of farmers — you know, the grower is kind of the last on the food chain and left without a home to sell their grapes, and that’s what we’re seeing right now,” he says.
35% of the Wine in the U.S. is Imported
Even prior to the recent tariffs, demand for U.S. wine was on the decline. With a slump in wine sales, that’s created a deficit in demand, says Chris Bitter, senior wine analyst for Terrain.
“Approximately 10% of U.S. grape or wine production by volume is exported,” says Spencer. “So, it’s a relatively small portion. And in terms of the U.S. market overall, we import about 35% of the wine that is sold in the U.S.”
Since more wine is imported than exported in the U.S., Schatz believes President Donald Trump’s push for tariffs could be a turning pointed for family-owned vineyards in the U.S.
“Here’s how hopeful I am: I’ve lost, in the last couple weeks, deals into China — of course Canada’s on hold — and into Sweden,” says Schatz. “So, these are places where we semi-regularly send wine to, and they’ve all run for the hills and said these deals are on hold and we’re not going to ship those wines. So, that even backs us up more.
“OK, fine, and I’m willing to stomach that,” he continues. “I’m hoping these tariffs change the dynamics right here in the United States. I would much rather do business right here than ship overseas.”
But not everyone is in that boat. Bitter isn’t confident that throttling back the amount of wine imported will translate to more domestic wine being sold and consumed in the U.S.
“It’s going to vary by location, by variety, by type of wine,” says Bitter. “So, it’s a complex issue. But at this point, I’m not seeing those tariffs as kind of the potential solution to the problem facing the grape market. While there could be some benefits in some areas, I don’t see that as something that is going to be turning the tide for grape growers in this state.”
As Bitter stated, the wine industry is complex, which is why the answer isn’t simple.
“Wine is highly regulated because it is an alcoholic beverage. And in the United States, we have something called the three-tier system where it is mandated that to import wine, you first have to import it through an importer. That importer then sells it to a distributor, and then that distributor sells it to the retailer,” says Bitter. “So, at all the various stages of that chain, the business doesn’t necessarily have to pass on that full tariff.”
Bitter says that means it’s unlikely to be a one-for-one increase with the tariffs, and distributors and retailers may find ways to eat those costs in the short-run.
“Now, if the tariffs last for a long period of time and are perceived to be permanent, we might see a switch in that. But I think that we will probably see some increase in differential between imported wines and domestic wines, but i don’t think it’s going to be as big as the kind of headline tariff numbers that we’re seeing,” Bitter says.
Canada is the top export market for the U.S. today, according to Spencer. In response to the Trump administration’s tense rhetoric regarding the country, Canadian liquor buyers, which are government controlled, have essential quit buying U.S. wine and spirits.
“And that one is problematic, because they’ve removed all California or U.S. wines and spirits from their store shelves. And so, that has had an impact,” he says.
But on the domestic side, Spencer says orders coming from areas of Europe, Australia and South America are on hold.
“On the domestic side of things though, and specifically coming out of Europe, we have already heard of a lot of orders getting put on hold, going both directions,” says Spencer.
“We have also heard indirectly that, you know, some of the orders have been picking up domestically for some of our wineries as well, too,” he adds.
Is There Enough Domestic Supply of Wine?
Spencer says from retailers to restaurants, some reports say there’s not enough domestic supply to make up for the imports that could be lost. That’s a claim he says simply isn’t true.
“Well, there’s thousands of tons unharvested last year that the tanks are full with wine, so there is definitely a spot for this domestic wine, yes,” he says. “It’s not all completely interchangeable, but at the same time, there is still a lot of opportunity domestically here to support California wines and domestic wines.”
For Bitter, it depends on the category and the types of grapes or wine. Sparkling wine is one example, he says. The U.S. imports 60% of all sparkling wine sold in the U.S.
“We don’t have the capacity to make up for that level of switch to domestic wines, so we don’t the capacity produce enough sparkling wine. To fully offset that if foreign sparkling wine sales fell to zero, we simply don’t have the capacity to do that, at least in the short term,” says Bitter. “But at the high end, folks who are drinking like high-end burgundies or Champagne or Bordeaux bridles may not see domestic wines as a direct substitute for what they’re drinking. So, they might drink less as opposed to just switching to domestic brands.”
Growers are Hopeful Tariffs Can Give California Farmers a Fighting Chance
Considering roughly one-third of the wine consumed in the U.S. is imported wine, grape growers and wine producers like Schatz are hoping the move to slow imports could give California farmers a fighting chance.
“If you go to your local grocery chain and there’s a floor stack of, say, this time of year you’d have a pink rose from Provence, and it’s beautifully stacked and labeled, and it sitting there and it’s $6.99 a bottle — that is what I’m hoping is clocked. That’s where my wine can come in,” he says. “And so a lot of these imports plop down on the floor, and I’ll never get a chance to compete with them. So, I’m hoping this tariff puts a kibosh on some of that and allow some of our wines to come in.”
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