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American whiskey has become collateral damage in Trump-era tariff disputes with Europe, and the distillers’ trade could become even more painful unless their entanglement in the transatlantic trade struggle is resolved soon.
The EU imposed tariffs on American whiskey and other American products in mid-2018 in response to Trump’s decision to cut tariffs on European steel and aluminum.
Since then, US whiskey exports to the EU have fallen by 37%, costing whiskey distillers hundreds of millions in revenue between 2018 and 2020, the US Distilled Spirits Council said. US whiskey exports to the UK, the industry’s fourth largest market, have fallen 53% since 2018, he said.
Tariffs are a tax that whiskey producers can either absorb by reducing their profits or pass on to customers through higher prices – and risk losing market share in highly competitive markets.
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“We are literally frozen,” Amir Peay, owner of Lexington, Ky., Based James E. Pepper Distillery, told The Wall Street Journal.
“Why drag us into this conflict?” He asked.
Bourbon, Tennessee whiskey, and rye whiskey have been left out of recent breakthroughs to begin rebuilding US trade relations with the European Union and the UK in the wake of Trump’s presidency. Tariffs have been suspended on some spirits, but the 25% tariff applied to American whiskey by the EU and the UK remains in place. And the EU tariff rate is expected to double to 50% in June in the main export market for US whiskey makers.
The leading spirits advocate is pleading with the leading US trade ambassador, Katherine Tai, not to leave the whiskey producers behind. The Council urged her to press for an immediate suspension of European tariffs and to obtain agreements to remove them.
“The rapid removal of these tariffs will help support American workers and consumers as the economy and the hospitality industry continue to recover from the pandemic,” the council said in a recent statement after Tai was confirmed by the Senate.
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The tariffs have also hurt the giants of the spirits industry.
“We estimate that our company … has borne approximately 15% of the entire tariff bill imposed on the United States in response to the steel and aluminum tariffs,” said Lawson Whiting, president and chief executive officer. management of Brown-Forman Corp. said recently. “They have become a big problem for us and it is imperative that we resolve them as quickly as possible.”
Brown-Forman’s flagship product is Jack Daniel’s Tennessee Whiskey, a global brand.
The suspended tariffs mean that some European spirits producers can ship their products to the United States duty-free, while American whiskey makers are still subject to tariffs, Whiting said.
“We just want a level playing field for American whiskey,” he said.
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Peay has spent years and a lot of money cultivating European markets, especially Germany, France and the UK. He planned to double his European activity before trade disputes arose.
“Twenty-five percent wiped us out,” he said of the threat to double the tariff. “Fifty percent will literally take us out of the European market.”
The Associated Press contributed to this report.
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