American whiskey and bourbon distillers were drowning in a river of their own whiskey.
In return, they avoided steep tariffs.
Starting January 1, the European Union was planning to impose a staggering 50% tariff on spirits produced in the United States. But an emergency ceasefire brokered by U.S. and European trade negotiators prevented what could have been a significant price increase for American spirits sold to the United States. EU.
“Bourbon is actually growing all over the world,” Senate Minority Leader Mitch McConnell (R-Ky.) said in an interview. “Previously, it was more of a southern U.S. preference. But the industry as a whole here has really picked up in the last five to 10 years. And Europe is a good market for us.”
US and EU postpone tariffs on whiskey and bourbon
McConnell and a bipartisan group of senators sent a letter to U.S. Trade Representative Katherine Tai several weeks ago urging her to come up with a solution before the tariff hikes hit.
McConnell and a bipartisan group of senators sent a letter to U.S. Trade Representative Katherine Tai several weeks ago. (J. Scott Applewhite)
“This has potentially devastating effects on us,” McConnell warned. “Bourbon is an important commodity in Kentucky, employing thousands of people. If this tariff goes into effect, it will affect not only the bourbon business, but also many Kentucky businesses, such as the corn farmers who supply the corn for bourbon. There will be job losses.”
Sen. Rand Paul (R-Ky.) also signed the letter sent to Tye.
“I’m from Kentucky. We have to worry about bourbon. We don’t want tariffs on bourbon. So this is a lingering effect of the trade war. ” Paul said. “It’s now a multi-billion dollar industry.”
Sen. Tim Kaine, D-Virginia, was stunned to learn how much whiskey Catoctin Creek, a Virginia distillery about an hour outside Washington, D.C., sells to the European Union.
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“They said, ‘These tariffs are ruining us.’ I said, ‘Wait a minute, I thought we sold whiskey here.’ And they said, “Yeah, but at that point about 40 percent of our product was for export, because people really like American whiskey. They like Virginia whisky.”
Let’s think for a moment about the impact of tariffs.
Sen. Rand Paul said, “I’m from Kentucky. We have to worry about bourbon. We don’t want tariffs on bourbon. So this is a trade war. The effects of this are lasting,” he said. (Joe Radle)
American bourbon staples like Jim Beam and Blanton’s are also famous in Europe. These come from a large distillery in Kentucky (Blanton’s Buffalo Trace Distillery). But tariffs could prevent premium distillers from selling their whiskey overseas. The likes of Brother Justus in the Twin Cities, New York’s Kings County, and Cincinnati’s Northside can be hard to find overseas.
One distillery actively selling to the EU is Boulder Spirits in Boulder, Colorado. Alastair Brogan is the owner and master distiller. Originally from Glasgow, Scotland, Brogan has been promoting his version of himself to Europe.
“We actually sell Boulder American, a single malt whisky, to mainland Scotland,” Mr Brogan said. “American whiskey has gained a serious foothold in Europe. Europeans are beginning to realize there’s more to whiskey than Scotch.”
Of course, Scotland is part of the United Kingdom. And after Brexit, the UK is no longer part of the EU. But Mr Brogan agreed with Mr Cain that Europeans were discovering sweeter, woodier and vanilla flavors from the US rather than malts produced in Scotland, Northern Ireland and the Republic of Ireland.
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However, additional tariffs would be a fatal blow.
“We’ve built a market,” Brogan said. “But we cannot maintain the 50% tariff. Therefore, we will have to withdraw from the European market.”
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The threat of tariffs forced Mr. Brogan to tell European distributors that he would not reserve space for future shipments.
“We are focused on other markets,” Brogan acknowledged. “Well, I had a few sleepless nights.”
From a taste standpoint, Americans are accustomed to enjoying smoky, peaty malts such as Lagavulin and Carrilla produced on Scotland’s “Whisky Island” of Islay. So are Speyside’s sweet spirits like Glenfiddich and Macallan. But it’s great when you come across lesser-known Scottish malts like Tormore, Bladnoch and Dairu Ainu. These labels are hard to find in the US, but when Americans do find them, it’s a palette-changing experience. And for the same reason, Europeans are finding themselves enjoying more obscure products, such as Boulder His Spirits and Catoctin Creek.
But none of that happens without open trade. Huge tariffs will trample it.
Ken Troske is an economist who studies trade at the University of Kentucky.
“I have a lot of bourbon myself,” Troske said. “I have a Tasmanian whisky, which is the best whiskey in the world. I had to go to Tasmania to buy it. I would love to get it in the US.”
So the impact of tariffs on consumers, however nifty, goes without saying for enthusiasts.
“Political leaders in recent years have, for lack of a better word, become foolish about the benefits of trade,” Troske said. “I don’t understand why they get so hung up on something as small as moving spirits around the world. Why? Why? It’s easily solved.”
“As a result, prices in the U.S. could fall,” Troske said. (St. Petersburg)
The current “fix” is only temporary. This would block tariffs on whiskey and bourbon until after the next U.S. president takes office in January 2025. But distilleries remind negotiators that they are dealing with spirits that need to be aged. Straight bourbon is only aged for two years. Most bourbons are aged for three years or more. In some cases, it may take 7 or 8 years. Therefore, when unforeseen circumstances arise, especially if he is likely to incur additional charges to Europe in 2025, the distiller will now have to decide how much product he needs to produce. becomes difficult.
A crystal ball will help. However, it is nearly impossible to predict the spirits market years in advance. At least establishing a tariff would eliminate one variable.
“What we’re really looking for is permanence,” Brogan said. “And with that, you can trade within the European Union and the United States.”
So Europeans who have just tasted a rare and exotic American whiskey may be disappointed. But there may be an upside for U.S. consumers. Withholding American spirits from Europe could create a glut here at home.
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“As a result, prices in the U.S. could fall,” Troske said.
That could create a river of whiskey here in the United States, but certainly not a river of cash for American producers.
