On Saturday, October 30, the U.S. and European Union (E.U.) came to an agreement to roll back the 25% tariffs that had been imposed on U.S. goods like whiskey in 2018. The deal goes into effect on January 1, 2022, and averts additional tariffs on U.S. products that were set to go into effect on December 1.
The 2018 tariffs on U.S. goods like whiskey, peanut butter and jeans were retaliatory response to the Trump administration’s taxes on E.U. steel and aluminum.
This weekend’s news provides relief for U.S. producers who say that the 2018 tariffs caused a “significant slump” for exports in 2019 and 2020. In March 2021, an agreement between the E.U. and U.S. lifted tariffs for U.S. wine, along with certain other domestic spirits, but tariffs on whiskey had remained until now.
Currently, tariffs between the United Kingdom and the U.S. are still in place.
Spirits producers greeted the latest news with relief, and cautious optimism about the effect on sales going forward.
“We are delighted with the lifting of the tariffs,” says Scott Harris, cofounder of Virginia craft distillery Catoctin Creek. In 2018, it halted its plans to begin exporting rye whiskey to Europe due to the tariffs. “It’s been many years now that we’ve been suffering under the 25% penalty, and today we have a free and fair market in Europe once again.”
Catoctin is wasting no time in resuming expansion plans and will ship 1,500 cases of whiskey to Europe this month, says Harris. “Even though sales were nearly zero for the last four years, we are now primed and ready to grow once again in Europe.”
“Today we have a free and fair market in Europe once again.” —Scott Harris, Catoctin Creek
Dr. Sonat Birnecker Hart, president of Chicago-based Koval Distillery, has a similar reaction.
“We are thrilled that the tariffs have been removed,” she says. “They created a huge burden for all American spirits brands, but especially craft brands like mine.” Prior to the tariffs, Koval’s export volume had been increasing about 20% a year, Hart says. “After the tariffs, these exports dropped over 50% and so did the confidence abroad for American whiskey brands.”
For many producers, the tariffs wrought severe opportunity costs. Even as U.S. whiskey brands focus on rebuilding their export business, supply chain issues, labor shortages and other pandemic-related problems could hamper plans for at least another year.
“It’s going to take some time,” says Amir Peay, owner/operator of Kentucky’s James E. Pepper Distillery. “We’re back to square one, in a sense. We’re happy and optimistic about the future, but it will take time to build back the business we had and the relationships.” Nonetheless, he’s confident about “2023 and onwards.”
The damage—and hope for the future—isn’t limited to craft distillers, of course.
“Since the imposition of the E.U. tariffs, American Whiskey exports to the E.U., the U.S. spirits industry’s largest export market, have plunged 37%, from $702 million to $440 million (2018–2020),” says Chris Swonger, CEO and president of the Distilled Spirits Council of the U.S. (DISCUS).
While “the end of this long tariff nightmare is in sight for U.S. distillers,” Swonger says, it’s not over until the situation with Britain is similarly resolved. “It’s time for the U.K. to lift its tariff on American whiskeys so we can all get back to toasts, not tariffs.”
Published: November 3, 2021
