Fascinating work by Flannen et al, here. Who Pays for Tariffs Along the Supply Chain? Evidence from European Wine Tariffs?
"We exploit additional detailed product-level alcohol label data for all wines sold in the U.S. to document how changes in product composition reflect an intriguing case of tariff engineering.
Because the initial tariffs only applied to wines defined by a threshold level of alcohol content (≤ 14% ABV), we document a systematic shift in new product offerings toward higher alcohol content exempt from these tariffs, as well as engineering of existing wines to modify the listed alcohol content for exemption from these tariffs"
They show an example of how wine was relabelled
And make the comment:
Given the speed with which we observe the tariff-engineering behavior documented in Figure 5 above, it seems unlikely that the wines changing threshold levels to avoid the higher tariff involved actual changes in alcohol content. Rather, these adjustments likely reflected changes in what was reported on wine labels. Using testing data from the Liquor Control Board of Ontario for 1992-2009, Alston, Fuller, Lapsley, Soleas and Tumber (2015) document that alcohol content was underreported on average, and that, conditional on underreporting, the true alcohol content was understated by 0.42 percentage points
A fascinating example of adjustment by non-price dimensions.
