South Florida Sun-Sentinel Palm Beach (Sunday)
U.S.-EU trade war sinks deals from whiskey to boat builders
PURCELLVILLE, Va. — Catoctin Creek Distilling, maker of rye whiskey, gin and the occasional fruit brandy, had big dreams of conquering Europe in 2018.
Scott and Becky Harris, founders of the small-town distillery in the foothills of the Blue Ridge Mountains, even had handshake agreements with the cocktail shakers of London’s finest hotels.
But weeks after the Harrises’ triumphant European tour, the White House unleashed a trade war with the European Union by slapping tariffs on steel and aluminum imports. The EU retaliated with tariffs that made some American goods, including bourbon and rye whiskey, more expensive to import.
Catoctin Creek’s orders from Europe dried up, and a potential British distributor lost interest. He “ghosted us like a bad girlfriend,” Scott Harris said from the distillery’s red-brick tasting room as a pair of shiny stills chugged away behind a plate-glass window. “He just stopped answering the phone.”
Washington’s trade dispute with Europe may have faded from the headlines in recent months, eclipsed by tensions with China, but the fallout continues for many companies around the country that have long targeted Europe as an achievable export market.
Barriers to Europe are especially vexing for small businesses, which often turn to the EU as their first export destination. The reliability of the legal system, the prevalence of English speakers and the high level of consumer income make it an easier market for small U.S. firms to navigate, entrepreneurs say.
The EU’s 25 percent tariffs have crimped the sales growth of a variety of U.S. exporters, including apparel companies, boat builders and peanut butter-makers.
Lee Zalben, founder of Peanut Butter & Co., a 15-person firm in Manhattan, said European buyers are canceling or trimming orders, or asking for discounts.
Exports to the European Union make up less than 2 percent of the firm’s revenue, but the company had been targeting Europe for sales growth, “so we’re having to find that growth in other areas,” Zalben said.
Catoctin Creek had been aiming to boost European exports from about 10 percent of its sales in early 2018 to as much as 25 percent to take advantage of the hip profile American whiskey has developed overseas. Instead, exports have fallen to close to zero.
“It’s essentially decimated our European business, and it’s put our expansion on hold,” said Scott Harris, who has instituted a hiring freeze and put off buying new stills and fermentation tanks at the 20-person distillery on Purcellville’s Main Street.
European officials are due to visit Washington this month to continue talks aimed at resolving the trade dispute.
Becky Harris, the chief distiller, said the slowdown also affects the company’s suppliers. “One of our (rye) farmers keeps asking, ‘When are we going to need more?’ ”she said.
Rivals are similarly discouraged.
“We’ve spent a lot of time and money to build up our business (in Europe), and to have it taken away with tariffs is frustrating,” said Paul Hletko, founder of Few Spirits, a gin and whiskey distillery in Evanston, Ill., that employs about 100 people. The company’s export volume fell by about 75 percent last year.
Cleveland Whiskey, an Ohio distiller with 15 employees, has lost about $150,000 in European revenue and has scrapped plans to hire two additional workers, said founder Tom Lix. He expressed frustration with what he sees as a self-inflicted wound.
“We started this, so I can’t really blame (Europe),” he said. “We started this, and everything else was retaliatory.”