Whiskey makers face worsening hangover from trade dispute

LOUISVILLE, KY. » A hangover from Trump-era tariff disputes could become even more painful for American whiskey distillers unless their entanglement in a trans-Atlantic trade fight is resolved soon.

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 Donald Trump’s presidency. Tariffs were suspended on some spirits, but the 25% tariffs slapped on American whiskey by the EU and UK 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.

A leading spirits advocate is imploring top U.S. trade envoy Katherine Tai to not leave whiskey producers behind. The Distilled Spirits Council of the United States 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.

American whiskey makers have been caught up in the trans-Atlantic 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 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 council said. American whiskey exports to the UK, the industry’s fourth-largest market, have fallen by 53% since 2018, it said.

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.

Amir Peay, owner of the Lexington, Kentucky-based James E. Pepper Distillery, said American whiskey has become “collateral damage” in the trade disputes. It’s cost him about threefourths of his European business, and the looming 50% EU tariff threatens to drain what’s left.

“That could possibly end our business in Europe as we’ve known it over the years,” Peay said in a phone interview Thursday.

He’s already curtailed some whiskey shipments to Europe as a hedge against the potential doubling of the EU tariff. His distillery’s signature bourbon and rye brand is James E. Pepper 1776.