President Trump’s lingering trade wars are about to soak American whiskey makers even as the rest of the US booze industry celebrate
President Trump’s lingering trade wars are about to soak American whiskey makers even as the rest of the US booze industry celebrates a recent lifting of tariffs on wine, vodka and rum.
Major US whiskey brands — from Woodford Reserve to Jim Beam and Maker’s Mark — have been on the rocks since 2018 over massive 25 percent tariffs imposed on their sales to Europe and the United Kingdom — thanks to a Trump-era war on steel and aluminum imports.
Now, even as the Biden administration works to rebuild US trade relations with Europe and the UK, tariffs on US whiskeys are poised to double on June 1 to 50 percent. Distillers say their sales to Europe, a key market for whiskey, will be put on ice indefinitely if that happens.
A 50 percent tariff would make us “so uncompetitive with a $30 bottle in the US costing 60 euros, that I won’t be able to ship product to Europe anymore,” Michael Langan, general manager of Yellow Rose Distilling of Houston, told The Post.
Yellow Rose’s shipments to Europe fell by fivefold to just 1,000 cases last year as a result of the tariffs, Langan said. If the 50 percent tariffs kick in, his US exports to Europe will fall to zero, he said, and bouncing back will be tough.
“American whiskey is losing market share and shelf space in Europe to competitors from Japan and Asia who are taking our place,” Langan lamented.
US whiskey exports to Europe were on the rise before the tariffs went into effect, up 28 percent for the first six months of 2018, according to the Distilled Spirits Council of the United States. Since then, however, US whiskey exports have fallen by 37 percent to Europe and 53 percent to the UK, the trade group said.
Among those suffering are Brown-Forman, the maker of Jack Daniel’s, which has been absorbing much of the added costs in an effort to not lose market share — suffering profit margin declines in the process.
But even a company like Brown-Forman, which also makes Woodford Reserve and Finlandia vodka, finds the impending 50 percent tariff hard to swallow.
“At a tariff rate of 25 percent, we decided to shield our European customers … whenever possible,” Chief Executive Lawson Whiting told Politico on March 11. “Everyone can imagine that, at a rate of 50 percent, suddenly that shielding becomes much more difficult.”
Brown-Forman is headquartered in Kentucky, the birthplace of bourbon, a type of whiskey that relies heavily on corn for its distinctive sweet flavor. Kentucky is also the home state of noted Trump ally Sen. Mitch McConnell, which is a big reason the whiskey industry was targeted by European trade representatives in the first place, experts said.
“The Trump administration took a very aggressive posture with the EU and as a result that contributed to the EU being very targeted at the time on where to apply the pressure points,” Chris Swonger, chief executive of the Distilled Spirits Council told The Post. “There’s a lot of whiskey made in Kentucky.”
It’s not just Kentucky that’s suffering, however. There are 37 states that export whiskey overseas and distillers from Virginia to New York say they are feeling the pain.
Cleveland Whiskey has already thrown in the towel on exporting to Europe as a result of the tariffs. “No one wanted to put product on a boat that they’d have to pay a lot more for when the product arrived,” explained Tom Lix, chief executive of the Ohio distillery, which derived 20 percent of its revenues from exports in 2017.
Exporting whiskey had also been the fastest growing segment of New York Distilling Co.’s business in hipster Williamsburg, Brooklyn, before the tariffs, accounting for 15 percent of sales in 2018, owner Tom Potter told The Post. The tariffs stopped that growth in its tracks and exports now account for just 5 percent of overall sales, Potter said.
“We thought it could eventually reach 50 percent of our sales,” said Potter, whose company makes rye whiskeys with names like Mister Katz’s and Ragtime Rye. “We don’t know if we can count on exports helping our company again.”
The tariffs have also poured cold water on exports at Catoctin Creek Distilling, a Purcellville, Va., distillery whose internationally recognized hootch is sold at Manhattan’s popular Astor Wines & Spirits.
Catoctin Creek’s whiskeys currently generate about $10,000 in sales from Europe versus several million in sales prior to the tariffs. “We had predicted that our overseas sales would double in 2018 to 22 percent,” Scott Harris, Catoctin Creek’s founder, told The Post. “But now it’s about half a percent.”
The Biden administration reached a truce in Trump’s trade war over aircraft subsidies earlier this month, resulting in a four-month freeze of tariffs that had been hammering a wide swath of US booze buyers and sellers — including a 25 percent tax by Europe on American rum, brandy and vodka and a 25 percent tax by the US on wines imported from the UK, Spain, Germany and France.
And the president’s newly confirmed Trade Representative, Katherine Tai, is now offering the whiskey industry hope, including a March 22 discussion with her EU and UK counterparts over “global steel and aluminum overcapacity,” the trade office said.
But the industries hurt by the on-going steel and aluminum trade war — a group that also includes tobacco sellers and Harley-Davidson motorbikes — continue to be slammed as Biden faces pressure from steelmakers and their unions to maintain the steel tariffs.
Harris of Catoctin Creek popped a bottle of champagne and posted on Twitter when the aircraft tariff truce broke on March 5, because he initially thought it would help the whiskey industry, he said.
“But then my wife sent me a private message telling me the reprieve wasn’t for us and I had to retract our congratulations that were going on out social media,” he said. “We felt unloved.”