Whiskey sour? Makers face hangover from trade dispute

American whiskey has become collateral damage in Trump-era tariff disputes with Europe, and the business for distillers could become even more painful unless their entanglement in the trans-Atlantic trade fight is resolved soon.

The EU imposed tariffs on American whiskey and other U.S. products in mid-2018 in response to Trump’s decision to slap tariffs on European steel and aluminum.

Since then, American whiskey exports to the EU are down by 37%, costing whiskey distillers hundreds of millions in revenue between 2018 and 2020, The Distilled Spirits Council of the United States said. American whiskey exports to the U.K., the industry’s fourth-largest market, have fallen by 53% since 2018, it said.

William Fielding, co-founder of Whiskey & Wealth Club, whose clients are able to access the exclusive world of wholesale cask whiskey with the complete package of turnkey ownership, told Fox Business the current tariffs aren’t necessarily bad for business.

"As global demand for whiskey rises both to drink and as an investment, this tariff will have a huge impact on the role of bourbon and other American whiskies within that growth. On the flip side — the U.S. tariffs being lifted will add to the huge growth opportunities for Scotch — making it an even better time to invest. Whilst the global future for bourbon remains unclear."

The tariffs amount to a tax, which whiskey producers can either absorb in reduced profits or pass along to customers through higher prices – and risk losing market share in highly competitive markets.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

“We are literally frozen,” Amir Peay, owner of the Lexington, Kentucky-based James E. Pepper Distillery, told The Wall Street Journal.

“Why drag us into this conflict?” he asked.

Bourbon, Tennessee whiskey and rye whiskey were left out of recent breakthroughs to start rebuilding U.S. trade relations with the European Union and the United Kingdom in the wake of Trump’s presidency. Tariffs were suspended on some spirits, but the 25% tariffs slapped on American whiskey by the EU and U.K. remain in place. And the EU’s tariff rate is set to double to 50% in June in the key export market for U.S. whiskey makers.

The leading spirits advocate is imploring top U.S. trade envoy Katherine Tai to not leave whiskey producers behind. The council urged her to press for an immediate suspension of the European tariffs and to secure agreements removing them.

“Swift removal of these tariffs will help support U.S. workers and consumers as the economy and hospitality industry continue to recover from the pandemic,” the council said in a recent statement after Tai was confirmed by the Senate.

US COFFEE MASTERS WEIGH PRICE INCREASES, CITE SHIPPING INFLATION

The tariffs have hurt spirits industry giants as well.

“We estimate that our company ... has borne roughly 15% of the entire tariff bill levied against the U.S. in response to steel and aluminum tariffs,” Lawson Whiting, president and CEO of Louisville, Kentucky-based Brown-Forman Corp., said recently. “They have become a big problem for us and it’s imperative that we get it resolved as soon as possible.”

Brown-Forman’s leading product is Jack Daniel’s Tennessee Whiskey, a global brand.

The suspended tariffs mean some European spirits producers can ship their products into the U.S. 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.

CLICK HERE TO READ MORE ON FOX BUSINESS

Peay spent years and significant money cultivating European markets, especially in Germany, France and the U.K. He was planning to double his European business before the trade disputes hit.

“Twenty-five percent has decimated us,” he said about the threat of doubling the tariff. “Fifty percent will literally take us out of the European market.”

The Associated Press contributed to this report.