Five years have passed since American Whiskey found itself entangled in a web of international trade disputes after the European Union (EU) imposed a hefty 25% retaliatory tariff on American Whiskey.
— Lisa Hawkins (@lisa_lhawkins) October 19, 2023
This abrupt decision sent shockwaves through the heartland of whiskey production, not just in the iconic landscapes of Tennessee and Kentucky but in the 28 states that together formed the backbone of the American Whiskey industry.
For a sector that had seen remarkable growth, driven largely by burgeoning European exports, the sudden imposition of tariffs was a cold, hard reality check. It left distillers reeling as the flow of American Whiskey to Europe dwindled, impacting a sector that was once on an upward trajectory.
A glimmer of hope emerged two years ago when the Biden Administration successfully negotiated a temporary suspension of the tariffs. Distillers, including industry stalwarts like Dr. Sonat Birnecker Hart, the visionary founder of Koval Distillery in Chicago, breathed a collective sigh of relief.
Dr. Hart, who had invested years building international relationships and painstakingly securing coveted spots on European shelves, managed to recover during this respite. Now, the shadows of uncertainty are creeping back. As October draws to a close, the temporary suspension hangs in the balance.
If negotiators fail to reach an agreement, the tariffs, instead of merely reverting to 25%, will double to a staggering 50%. The implications are dire, particularly for craft whiskey exporters like Dr. Hart.
A 50% tariff would erase her European profits, forcing her to make a tough choice. Either she raises prices, potentially losing her competitive edge, or she absorbs the costs, putting domestic investments and jobs at risk.
The past two years have shown the untapped potential for growth in Europe, with American whiskey exports to the EU surging by 118% in the first half of 2023 compared to the same period in 2022. These numbers could have been even more impressive were it not for the looming threat of tariffs holding back many distillers.
These tariffs have the potential to irreparably harm the success of Bourbon and American Whiskeys abroad. European consumers’ loyalty can only endure so many price shocks and supply disruptions before they consider alternatives like Scotch or Japanese Whiskey.
The impact wouldn’t just be felt overseas; it would reverberate back home. The spirits industry, with its remarkable growth from 35 distilleries two decades ago to 2600 today, is an economic success story. It fuels the economy, supports agriculture, and invigorates communities.
American distillers are imploring the Biden administration to secure the permanent removal of these tariffs. The clock is ticking, and the summit on October 20th will bring trade representatives from across the U.S. and EU together where a decision will be made..