American whiskey may face increased tariffs in the European Union (EU), potentially impacting its affordability for European consumers. This week, a trade summit between the EU and the United States aims to address ongoing negotiations concerning tariffs on goods traded across the Atlantic Ocean. If an agreement is not reached by the end of the month, the EU is set to impose a 50% tariff on imported bourbon and rye, effective from January 1, 2024.
The potential tariff hike could pose challenges for American whiskey sales in its primary export market. This issue has been a point of contention for more than five years, with the EU initially imposing tariffs on American whiskey in retaliation to tariffs imposed by the Trump-era White House on steel and aluminum imports from EU member countries back in June 2018.
According to data from the Distilled Spirits Council, the imposition of tariffs led to a 20% decrease in American whiskey export revenue, dropping from $552 million in 2018 to $440 million by 2021. Progress was made in June 2022 when the EU finally lifted its 25% tariff. However, the looming threat of a 50% tariff reintroduction is now a cause for concern. On a positive note, there is cautious optimism as Western nations seek to present a united front against Russia and China.
Chris Swonger, the president and CEO of the Distilled Spirits Council, expressed hope for a tariff-free agreement emerging from the trade summit, stating, “We are hopeful that an agreement comes out of this trade summit that keeps American Whiskey exports to the EU tariff-free. The prospect of tariffs returning is a source of anxiety for U.S. distillers.”
Many craft producers are contemplating withdrawing their products from the European marketplace if the tariffs are reintroduced. Jeff Quint, founder of Cedar Ridge Distillery in Swisher, Iowa, commented, “Over the last several years, our sales into the EU have been sporadic. We are selling what we can, but we’re not heavily investing there. With the tariffs still looming, there is simply too much risk and uncertainty.”
The uncertainty and potential risks are hindering the growth of smaller distilleries, which, in turn, has a notable impact on domestic agriculture. In 2022, the American whiskey industry used 2.73 billion pounds of grains for producing whiskey, brandy, rum, gin, and vodka across all 50 states, marking a 33% increase over the past decade.
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