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American whiskey has become collateral damage in the Trump-era tariff disputes with Europe, and the business for distillers could become even more painful unless their entanglement in the trans-Atlantic trade battle is resolved soon.
The EU imposed tariffs on U.S. whiskey and other U.S. products in mid-2018 in response to Trump’s decision to cut tariffs on European steel and aluminum.
Since then, U.S. whiskey exports to the EU have fallen by 37%, costing the distilleries hundreds of millions in revenue between 2018 and 2020, the United States Distilled Spirits Council said. U.S. whiskey exports to the UK, the fourth largest market in the industry, have fallen by 53% since 2018.
The rates are a tax that whiskey producers can absorb at a reduced profit or pass on to customers through higher prices – and risk losing market share in very competitive markets.
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“We are literally frozen,” Lexington, owner of Lexington, Kentucky-based James E. Pepper Distillery, told The Wall Street Journal.
“Why are we dragging ourselves into this conflict?” he asked.
Bourbon, Tennessee whiskey and rye whiskey have been left out of recent breakthroughs to rebuild U.S. trade relations with the European Union and the United Kingdom following Trump’s presidency. Tariffs have been suspended on some liquor, but the 25% tariffs beaten on American whiskey by the EU and the UK still remain. And the EU tariff will double to 50% in the main export market for US whiskey producers in June.
The leading lawyer insists on begging top US envoy Katherine Tai not to leave whiskey producers behind. The council urged her to insist on the immediate suspension of European tariffs and to secure agreements that remove it.
“The rapid removal of these tariffs will support U.S. workers and consumers as the economy and hospitality industry continues 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 strong giants in the industry.
“We estimate that our company carried approximately 15% of the total tariff bill against the U.S. in response to steel and aluminum tariffs,” Lawson Whiting, president and CEO of Louisville, Brown-Forman Corp., based in Kentucky, said recently. “It has become a big problem for us and it is vital that we resolve it as soon as possible.”
Brown-Forman’s leading product is Jack Daniel’s Tennessee Whiskey, a global brand.
The suspended tariffs mean that some European liquor producers can ship their products tax-free to the US, while US whiskey producers are still subject to tariffs, Whiting said.
“We just want an equal playing field for American whiskey,” he said.
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Peay has spent years and a lot of money cultivating European markets, especially in Germany, France and the United Kingdom. He intended to double his European business before the trade disputes began.
“Twenty-five percent reduced us,” he said of the threat to double the rate. “Fifty percent will literally take us out of the European market.”
The Associated Press contributed to this report.