LOUISVILLE, Ky. – A hangover from Trump-era tariff disputes could be even worse for American whiskey distillers if their involvement in a transatlantic trade fight is not resolved soon.
Bourbon, Tennessee and rye whiskeys were recently left out of bankruptcy to begin rebuilding US trade relations with the European Union and the United Kingdom after the presidency of Donald Trump. Tariffs have been lifted on some spirits, but the 25% tariffs imposed on American whiskey by the EU and the UK remain in place. And the EU tariff rate is expected to double to 50% in June in the main export market for U.S. whiskey producers.
A top spirits advocate is urging U.S. trade ambassador Katherine Tai not to leave whiskey producers. The U.S. Sediment Spirits Council urged it to push for an immediate suspension of European tariffs and to make agreements to remove them.
“The speedy removal of these tariffs will help support U.S. workers and consumers as the economy and hospitality industry recover from the pandemic,” the council said in a recent statement. shortly after Tai was ratified by the Senate.
American whiskey makers have been caught up in the transatlantic trade dispute since mid-2018, when the EU imposed taxes on American whiskey and other U.S. products in response to a decision Trump to impose tariffs on European steel and aluminum.
Since then, American whiskey exports to the EU have fallen by 37%, costing whiskey distillers hundreds of millions in revenue between 2018 and 2020, the council said. American whiskey exports to the UK, the fourth largest market in the industry, have fallen 53% since 2018, he said.
Tariffs are a tax, which whiskey producers can absorb lower profits or bring to consumers through higher prices – and risk losing market share in emerging markets. is very competitive.
Amir Peay, owner of the James E. Pepper Distillery in Kentucky, said American whiskey had become “collateral damage” in the trade disputes. It has cost around three-quarters of its European business, and an EU tariff of nearly 50% threatens to drain what is left.
“That could end our business in Europe as we have gained experience over the years,” Peay said in a phone interview on Thursday.
It has already cut off some whiskey vessels to Europe as a hedge against the doubling of EU tariffs. His distillery signature is James E. Pepper ‘s 1776 signature of bourbon and rye.
Peay spent years and large sums of money cultivating European markets, particularly in Germany, France and the UK. He planned to double his European business before the trade controversies struck.
“As things go, everything we’ve put in so far looks like it could be ruined,” he said.
The tariffs have also hurt the spirits industry giants.
“We estimate that our company… has raised approximately 15% of the total tariff bill against the U.S. in response to steel and aluminum tariffs,” said Lawson Whiting, president and CEO Louisville, Brown-Forman Corp., based in Kentucky. . “They have become a major problem for us and it is vital that we resolve them as soon as possible. ”
Jack Daniel’s flagship product is Jack Daniel’s Tennessee Whiskey, a global brand.
For Kentucky bourbon producers, export tariffs rose 35% in 2020, with shipments coming to the EU falling nearly 50%, the Kentucky Distillers’ Association said.
The EU had traditionally been the largest global market for Kentucky distilleries, accounting for 56% of all exports in 2017. It is now about 40%, the association said.
“Our sign bourbon business has been wreaked havoc for more than two years due to a trade war that has nothing to do with whiskey,” said KDA President Eric Gregory. “And it will only get worse if we can’t put an end to this controversy. ”
Kentucky distilleries craft 95% of the world’s bourbon supplies, the association estimates.
The meltdown in US disputes with the EU and the UK was part of an effort to resolve the long-standing Airbus-Boeing dispute. The tariff charges related to duties imposed on some spirit representatives on both sides of the Atlantic. But the breaches left many unsolved, amid controversies that led the revenge targets to continue to hit American whiskey.
The suspended tariffs mean that some European spirit producers can submit their products to U.S. taxes for free, while American whiskey producers are still subject to taxes, Whiting said.
“We just want a fair park for American whiskey,” he said.