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For thousands of distillers across the country, a celebration is in order. After four long years, they will finally be able to sell their whiskeys in the UK and the EU without the burden of heavy tariffs. The Biden administration has successfully negotiated the suspension of 25% tariffs on US whiskeys imposed by the UK and the EU following the Trump-era trade disputes over steel and aluminum. The UK tariff suspension will take effect on 1 June.
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Artisanal distillers, who have been fighting for years under the heavy burden of heavy tariffs and pandemic disruptions, have good reason to rejoice, but are still keenly aware that the suspension is only temporary. EU tariffs on American whiskeys in the steel and aluminum dispute will resume in two years if no agreement is reached.
It takes time to increase export capacity, and distillers need certainty to plan ahead. Take the example of the Chicago-based Koval Distillery. Its founder, Dr. Sonat Birnecker Hart, wants to regain access to European shelves, but she knows it takes time and money. It took him years of “whiskey diplomacy” at international fairs and phone calls with foreign distributors to gain a highly competitive space abroad. Tariffs erased much of that progress. His company’s exports to the EU and Britain had risen by 25% each year until tariffs arrived. Then they went down 60%.
Now, distillers like Dr. Hart is faced with an option: do I campaign to regain market share, only to be able to get out of it in two years? Or can I play safely and potentially cede valuable territory to competitors?
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Many of the more than 2,000 artisanal distillers in the United States face this choice, and supply chain problems make it even more difficult. To complicate matters further, even though this is a two-year tariff suspension, it is actually only a year and a half, at best, because it takes six months to bring the products to a ship. and for the ship to cross the Atlantic Ocean.
Undoubtedly, the suspensions are a welcome and exciting development for an industry that, for years, could hardly rest. The pandemic forced distillers to close their tasting rooms and reduced the sales of their restaurants, two major sources of revenue. Just as the pandemic seemed to be easing, inflation pushed up the price of corn, barley, glass bottles and other inputs.
In addition to seeking a permanent return to tariff-free trade with the EU and the UK, the Biden administration can maintain momentum by negotiating new market-opening agreements to reduce the import tariffs on alcoholic beverages. USA to other countries. The new Indo-Pacific economic framework would be a great place to start, but tariff reductions are not on the table. India, the world’s largest whiskey market and one of the 12 countries involved in the negotiations, has for decades imposed a 150% tariff on imported alcoholic beverages, effectively keeping US alcoholic beverages out of the market. potentially large. The industry urges the administration to take advantage of its major victories with the UK and the EU and expand opportunities for US spirits exports to potential consumers in other markets. The best way to do this is to reach agreements with trading partners that reduce or eliminate tariffs on our exports.
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The data is clear: 86% of spirits exports go to countries without tariffs, and exports to these countries are growing significantly faster than countries that have not eliminated tariffs, according to the database. USITC. When American liquors are sold abroad, they do more than spread joy and strengthen cultural exchange. They also create jobs up and down the supply chain, from local family farmers to bottling and shipping facilities.
If vibrant American artisanal distillers cannot sell their products to 95% of the world living outside our country, their growth prospects will be limited. With the temporary suspension of the tariff, American distilleries achieved a victory. We now look forward to a more permanent solution.
In the meantime, we’ll be offering a toast to this exciting show of progress and an even brighter future for American whiskey.