LOUISVILLE, Ky. (AP) –
A hangover from Trump-era tariff disputes could become even more painful for American whiskey distillers, unless their entanglement in a transatlantic trade struggle is soon resolved.
Bourbon, Tennessee, and rye whiskey were left out of recent advances to begin rebuilding U.S. trade relations with the European Union and the United Kingdom following Donald Trump’s presidency. Some spirits suspended tariffs, but the EU and the UK still have 25% tariffs on American whiskey. And the EU tariff rate will double to 50% in June in the key export market for American whiskey makers.
One of the main proponents of the spirit implores the top American commercial envoy Katherine Tai not to leave whiskey producers behind. The United States Distillit Spirits Council urged her to push for an immediate suspension of European tariffs and to reach agreements to eliminate them.
“The rapid elimination of these tariffs will help U.S. workers and consumers as the economy and hospitality continue to recover from the pandemic,” the council said in a recent statement after Tai was confirmed by the Senate.
U.S. whiskey makers have been caught up in the transatlantic trade dispute since mid-2018, when the EU imposed tariffs on American whiskey and other U.S. products in response to Trump’s decision to slash steel tariffs and European aluminum.
Since then, U.S. whiskey exports to the EU have fallen 37 percent, bringing in revenue between hundreds of millions of whiskey distillers between 2018 and 2020, the council said. U.S. whiskey exports to the UK, the industry’s fourth-largest market, have fallen 53% since 2018, he said.
Tariffs equate to a tax, which whiskey producers can absorb at reduced profits or pass on to customers through higher prices and run the risk of losing market share in highly competitive markets.
Amir Peay, owner of the James E. Pepper distillery, based in Lexington, Kentucky, said American whiskey has become “collateral damage” in trade disputes. It has cost him about three-quarters of his European business and the imminent 50% EU tariff threatens to exhaust what is left.
“This could end our business in Europe as we know it over the years,” Peay said in a telephone interview Thursday.
It has already reduced some shipments of whiskey to Europe as protection against the potential doubling of EU tariffs. The bourbon and rye brand of his distillery is James E. Pepper 1776.
Peay spent significant years and money cultivating European markets, especially in Germany, France, and the United Kingdom. He planned to double his European business before trade disputes arrived.
“As things stand, everything we’ve invested so far looks like it could be destroyed,” he said.
Tariffs have also affected the giants of the spiritual industry.
“We estimate that our company has borne approximately 15% of the total tariff bill charged against the United States in response to steel and aluminum tariffs,” Lawson Whiting, president and CEO of Brownville-Forman Corp., said. based in Louisville, Kentucky, he said recently. “They have become a big problem for us and it is imperative that we fix it as soon as possible.”
Brown-Forman’s leading product is Jack Daniel’s Tennessee Whiskey, a world brand.
For Kentucky bourbon producers, tariffs reduced their exports by 35% by 2020, with shipments to the EU falling by almost 50%, the Kentucky Distillers’ Association said.
The EU had traditionally been the largest world market for Kentucky distilleries, accounting for 56% of all exports in 2017. It is now around 40%, the association said.
“Our Bourbon industry has suffered significant damage for over two years due to a trade war that has nothing to do with whiskey,” said KDA President Eric Gregory. “And it will get much worse if we can’t escalate this dispute.”
Kentucky distilleries manufacture 95% of the world’s Bourbon supply, according to the association.
The thawing of U.S. disputes with the EU and the UK was part of an effort to resolve a lengthy Airbus-Boeing dispute. Tariff suspensions applied to the duties that had been imposed on some spirits producers on both sides of the Atlantic. But advances left many things unresolved, including disputes that led to retaliatory tariffs still hitting American whiskey.
Suspended tariffs mean 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 uniform playing field for American whiskey,” he said.