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American whiskey has become collateral damage in Trump-era tariff disputes with Europe, and the distillers’ business could become even more painful unless their involvement 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 impose tariffs on European steel and aluminum.
Since then, US whiskey exports to the EU have fallen 37%, costing whiskey distillers hundreds of millions in revenue between 2018 and 2020, the United States Council on Spirits said. American whiskey exports to the United Kingdom, the industry’s fourth largest market, have dropped 53% since 2018, he said.
Tariffs are equivalent to a tax, which whiskey producers can absorb at reduced profits or pass on to customers through higher prices – with the risk of losing market share in highly competitive markets.
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“We are literally frozen,” Amir Peay, owner of the James E. Pepper Distillery based in Lexington, Kentucky, told The Wall Street Journal.
“Why drag us into this conflict?” he asked.
Bourbon, Tennessee and rye whiskey were left out of recent discoveries to begin rebuilding U.S. trade relations with the European Union and the United Kingdom after Trump’s presidency. Tariffs have been suspended on some spirits, but the 25% tariffs applied to American whiskey by the EU and the United Kingdom remain in force. And the EU tariff is set to double to 50% in June on the main export market for US whiskey makers.
The main proponent of alcoholic beverages is pleading with the main commercial envoy of the USA, Katherine Tai, to not leave the whiskey producers behind. The council urged it to press for an immediate suspension of European tariffs and to secure agreements to remove them.
“Rapid removal of these tariffs will help support US workers and consumers as the economy and the hospitality industry continue to recover from the pandemic,” the board said in a recent statement after Tai’s confirmation by the Senate.
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Tariffs have also hurt giants in the spirits industry.
“We estimate that our company … has borne about 15% of the entire tariff charged against the US in response to steel and aluminum tariffs,” Lawson Whiting, president and CEO of Brown-Forman Corp in Louisville, Kentucky, said recently. “They have become a big problem for us and it is critical 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 alcoholic beverage producers can ship their products to the United States tax-free, while American whiskey makers are still subject to the tariffs, Whiting said.
“We just want a level playing field for American whiskey,” he said.
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Peay spent years and a lot of money cultivating European markets, especially in Germany, France and the United Kingdom. He planned to double his European business before trade disputes started.
“Twenty-five percent decimated us,” he said of the threat of doubling the tariff. “Fifty percent will literally take us out of the European market.”
The Associated Press contributed to this report.