The Distilled Spirits Council of the United States (DISCUS) has sounded the alarm as the European Union prepares to reinstate tariffs on American whiskey at a staggering rate of 50% on January 1, 2024. This move comes after an unsuccessful attempt to secure a long-term agreement between U.S. President Joe Biden and European Commission President Ursula von der Leyen during the recent US-EU Presidential Summit.
American whiskey distillers are deeply concerned about the impact of these tariffs on their industry. DISCUS President and CEO Chris Swonger has described them as a "serious threat" to American distilling, emphasizing the detrimental effects they could have on the industry's growth in international markets.
The story begins back in June 2018 when the EU initially imposed a 25% retaliatory tariff on American whiskeys in response to the U.S.'s tariffs on steel and aluminum under then-President Donald Trump. This move resulted in a 20% drop in American whiskey exports to the EU, causing the industry's revenue to fall from $552 million to $440 million over the course of three years (2018-2021).
However, a ray of hope emerged in October 2022 when the U.S. and the EU agreed to suspend the 25% tariff for two years, starting on January 1, 2022. This led to a significant rebound in American whiskey exports to the EU, with the industry reaching $566 million in 2022, a remarkable 29% increase compared to 2021. This surge managed to surpass pre-tariff levels, reaching a value of $518 million in 2017.
The suspension offered a glimmer of optimism for American whiskey distillers, especially given the fact that the EU is their most significant export market. By July 2023, American whiskey exports to the EU had skyrocketed by nearly 91% compared to the same period in 2022.
However, as the two-year suspension period comes to an end on January 1, 2024, the industry now faces the grim prospect of the tariffs being reinstated. Chris Swonger's statement highlights the urgent need for the Biden Administration to prioritize the permanent removal of these tariffs. The uncertainty surrounding the duration of the tariffs looms as a significant obstacle to the whiskey industry's growth in its crucial international market.
In essence, the American whiskey industry's fortunes have been a rollercoaster ride, from plummeting exports due to tariffs to a remarkable recovery during the tariff suspension. But as the return of the tariffs draws near, the industry stands at a crossroads, fervently hoping for a resolution that will permanently eliminate this economic burden and sustain its international momentum.