Free Trade

American Tariffs Are Bad for Booze. European Tariffs Would Be a Disaster.

The E.U. is considering levying $4 billion in new tariffs on American goods, with alcohol likely to be one of the targets.

|

American distillers have already taken heavy collateral damage in a trade spat over airplane manufacturing subsidies—and now things could be taking a turn for the worse.

If the European Union (E.U.) follows through on a threat to impose $4 billion in new tariffs against American-made goods, booze is likely to be one of the major targets. Earlier this month, arbitrators at the World Trade Organization (WTO) granted permission for the E.U. to impose those tariffs in retaliation for more than $7 billion in new tariffs levied by the Trump administration on European imports in October of last year—those 25 percent levies targeted "cultural goods" including Scotch whisky, Italian pasta, and German ham.

If Europe decides to retaliate, it would represent another major escalation in a years-long dispute over how governments on both sides of the Atlantic subsidize the manufacturing of airplanes—a conflict that has already done significant damage to unrelated industries, like the production of alcoholic beverages.

According to trade data tracked by the Distilled Spirits Council of the United States, an industry group, American whiskey exports to European countries declined by 41 percent from August 2019 through July 2020. That decline represents more than $300 million in lost sales to the largest export market for American whiskey.

The fact that tariffs on imported booze could have damaged American exports of the same products might come as something of a surprise. If tariffs worked the way President Donald Trump and his top trade advisors believe they do, then American distillers should have benefitted from being protected against foreign competition.

But, in fact, exports are often unintended victims of protectionist trade policies. The 25 percent tariffs against Scotch whisky, for example, have caused imports to fall by about 35 percent since last year, according to the Distilled Spirits Council's data. That means Americans are importing less whisky from Europe, so Scotch-makers are having to sell more of their product closer to home, thus slackening demand for American-made booze overseas.

Practically, it means that some American distillers are being shut out of the European market and some European producers are now postponing or canceling plans to sell to Americans. On both sides of the Atlantic, the result is less choice for consumers and fewer sales opportunities for producers.

In short, it's impossible to raise a trade barrier that only works in one direction.

The same thing has happened with the more well-known aspects of Trump's trade war. "A tax on imports is a tax on exports," writes C. Fred Bergstein, a senior researcher for the Peterson Institute for International Economics, a trade-focused think tank. That "tax" can take many different forms. Artificially inflating the cost of imports can hike production costs for goods that will eventually be exported, for example, or it can shift foreign demand in ways that rebound to the disadvantage of domestic producers, as in the case of the whisky tariffs.

More tariffs will only make things worse.

"The escalation of tariffs on the distilled spirits and wine sectors, by either the U.S. or E.U., will only increase harm to an industry already suffering," a group of 18 trade associations representing American and European alcohol and hospitality industries wrote earlier this month in a joint letter to the United States Trade Representative and the European Commission for Trade. Those industries are already facing "incredible economic harm due to the mandatory closings of restaurants, bars, and distillery and winery tasting rooms in response to the outbreak of COVID-19."

The groups are urging both the U.S. and E.U. to drop tariffs on booze. Until that happens, whiskey businesses on both sides of the Atlantic will continue to be on the rocks.

NEXT: Freed To Speak, Grand Juror Says Charges in Breonna Taylor's Death Were Never Considered, Let Alone Rejected

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Bourbon for us American men, and those skirt wearing Scottish fags — too scared to be independent, at that — can keep swigging their girly Scotch.

    1. It does seem odd to me how the Scots have latched on to socialism so hard. Here’s hoping they get their independence and have to face fiscal reality!

      1. Google pays for every Person every hour online working from home job. I have received $23K in this month easily Cgh and I earns every weeks $5K to 8$K on the internet. Every Person join this working easily by just just open this website and follow instructions………….. Visit Here

        1. Google is by and by paying $27485 to $29658 consistently for taking a shot at the web from home. I have joined TP this action 2 months back and I have earned $31547 in my first month from this action. I can say my life is improved completely! Take a gander at it

          what I do………Click here

    2. Poor Boehm.

      Trump offered free trade to our trading partners and they refused.

      After Trump is reelected, the Socialists in the EU will have to lower trade restrictions with the USA or not have access to lucrative American markets.

      China, Canada, the EU caved before to Trumps trade strategy and they will do it again.

      1. Saint Trump!

        1. PART TIME JOB FOR STUDENTS
          Google is by and by paying $27485 to $29658 consistently for taking a shot at the web from home. I have joined TOP this action 2 months back and I have earned $31547 in my first month from this action. I can say my life is improved completely! Take a gander at it

          what I do………Click here

        2. At least he offered free trade.

          1. I quit working at shop rite and now I make $65-85 per/h. How? I’m working online! My work didn’t exactly make me happy so I decided to take a chance on something new af after 4 years it was so hard to quit my day job but now I couldn’t be happier So i try use. Here’s what I do…>>Home EASY Work

    3. Start earning today from $600 to $754 easily by working online from home. Last month i have generated and received $19663 from this job by giving this only maximum 2 hours a day of my life. Easiest job in the world and earning from this job are just awesome. Everybody can now get this job and start earning cash online right now by just follow instructions click on this link and vist tabs( Home, Media, Tech ) for more details thanks……Click here 

  2. STAY AT HOME & WORK AT HOME FOR USA ►Check it out, and start earning yourself . for more info visit any tab this site Thanks a lot Here… Click here.

  3. Tariffs are also bad for Charles Koch, the billionaire who funds Reason.com. Unlike Bezos, Gates, Musk, Zuckerberg, Ballmer, Page, Brin, Ellison, and the Waltons, Mr. Koch cannot thrive in a high-tariff / low-immigration economy. IOW his recent financial struggles are entirely Drumpf’s fault.

    Only a Joe Biden Presidency will return our benefactor to prosperity.

    #AllBillionairesMatter

    1. Tell Koch to drink more American booze. It will help ease the pain.

  4. One of my favorite things growing up in the 80s and 90s was listening to Europeans bitch and moan about the crass, crude Americans and their consumerism and shallow taste- as they packed their american liquor from the Duty Free to take back home.

    The United States has done much for the world, just in the goods it ships over seas. Brittany Spears probably did more to spread American Culture in the late 90s than Clinton ever did.

    Anyways, the breakdown of these long standing trade routes is not a good thing.

    1. American culture, or American cultures?

    2. Agreed, but why is the thrust of these articles never, “Gee, since tariffs suck, it’d be great if the EU dropped their pre-existing, protectionist tariffs.” I mean, if free trade is really important and all.

      Instead, here it’s always, “Booo! USA! Booo! How dare you retaliate with your own tariffs?”

      The Euros want to fuck over some more of their access to American goods—which will lead to yet another round of American retaliation, should Trump win—instead of simply getting rid of whatever subsidy that started all of this in the first place? OK, I guess. Lower demand by Euros for American booze should equal lower domestic booze consumer prices for the same goods, right? Sucks for US producers though.

      1. There. It is a policy of ignoring reality so you can always be a victim. It is a stupid reality that Reason and others push here. Instead of admitting to reality and recognizing tit for tat as an existing game theory strategy in economics, Reason just pretends the US being suckers to everyone else somehow benefits them.

        The irony is that the equilibrium in tit for tat game theory is everyone collaborating. Something Reason seems to ignore.

      2. To be fair, Reason is an American publication, and as Americans we control our own policy but we don’t control EU policy. From the perspective of “tariffs are bad”, it makes sense that Reason would advocate that we should be removing our tariffs regardless of what the EU does with theirs.

        1. Why, Moonrocks?

          Let’s agree that tariffs are bad. Then, our advocacy should be towards whatever is more likely to get rid of tariffs. Unilateral disarmament may not be the answer to that question. It might instead be, that the least tariffs, for the least amount of time, occur when a retaliatory tariff is enacted to punish the other side’s behavior in enacting the tariff in the first place.

          Versus unilaterally deciding never to tariff, which though it removes one side of the tariff equation, may result in the other side continuing their tariff in perpetuity, resulting in a longer lasting tariff cost than the first case.

          The people who underwrite this magazine, evidently don’t care about whether exported US goods are tariffed. So we never read about the harm that those tariffs cause. Instead, they are exquisitely sensitive to tariffs on imports, and anything else that cause their COGS to be high. So we hear all about how bad the US tariffing imports are.

          1. I quit working at shoprite and now I make $65-85 per/h. How? I’m working online! My work didn’t exactly make me happy so I decided to take a chance on something new…AMs after 4 years it was so hard to quit my day job but now I couldn’t be happier.

            Here’s what I do…>> Home Profit System

      3. I think Trump phrased it wrong. He should have said that the US will be applying tariffs to all countries whose companies do not pay the same level of wages and benefits that the US does or subsidize industries that harm US companies. The money raised will be used to fund research and development of green energy and conservation projects here and around the world.

        There, I would like to see the left argue with that.

        1. The US is a wasteland of low pay and no benefits, unlike those sainted and holy EU countries who are only putting tariffs on our goods because our exports are vastly inferior to theirs. And that money will probably fund how to destroy green energy altogether because Trump hates science and the environment.

          Oh, and you’re a racist just for suggesting this.

          (/s in case no one could tell)

  5. “If Europe decides to retaliate, it would represent another major escalation in a years-long dispute…” etc., etc., ….

    When the bulls fight, only the grass suffers.

    1. One loose progressive-bull tromps farm more grass than two bulls lock-horned.

  6. Trump and supporters love tariffs and trade wars.

    American whiskeys are sought after around the world. We also have a premier wine industry.

    End these pointless trade wars.

    Free trade. Free movement of goods, services, and people.

    1. Amen

      1. Even after this morning you’re agreeing to the lies you’ve created in your head. Amazing.

    2. Indeed, if Reason thinks people can sell something entirely plant based and still call it milk there is really no reason why we should be prohibited from selling Wisconsin Parmesan or Okanogan Champagne in Europe.

      1. AOC laws always struck me as analogous to trademark laws, in that they tried to alleviate consumer confusion, if not outright fraud. Your ordinary reasonable consumer might, IMHO, be confused by a product labeled “Champagne…from Suisun Valley,” or “Parmesan cheese from Waukegan.” Where they probably won’t be confused in thinking that “Oat Milk,” actually came from a cow. Maybe you disagree.

        Like a lot of things in trademark law though, whether a mark is actually infringing, or leads to an increase in unfair confusion among a typical relevant ordinary consumer, is often going to be really fact dependent.

    3. Why does your side have to lie so much about what people love or want? Everyone wants free and open trade. But you refuse to recognize the reality we actually do live in, one in which actors are anti free trade and abusive. In reality, if an actor in a market is stealing, lying, and using anti competitive practices while you remain saintly and noble, you are at a natural disadvantage. The action isn’t to lay down and take it, because that will end in you being remove from the market.

      Very simplistic scenario for you purists (aka naïve sots).

      The mob sets up a shop selling stolen goods from your company (monthly robberies in this scenario). You have enough supply to stay in the market. You eat the increased costs for security, loss of goods, by raising prices. This is detrimental to your customers, but they persist. The mob then opens up a shop next to yours selling your stolen goods at half price. In your view it wouldn’t be prudent to take market action through government against them because it is a free market after all!!!!

      Yet this is what you idiots keep doing when you refuse to acknowledge the bad practices of trade partners like China and others. It’s just sad to see at this point.

    4. Trump offered free trade and it was refused by our trading partners.

  7. Then: NO TAXATION WITHOUT REPRESENSATION!
    Now: PEN AND A PHONE, BITCHES! MAGA 2020!

    How the mighty have fallen.

  8. “Senate Democrats blocked Republicans’ attempt to pass a $500 billion coronavirus stimulus bill Wednesday as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin make a last-ditch push to strike a relief deal before the 2020 election.

    The GOP tried to advance its bill, similar to one Democrats opposed last month. The measure failed in a 51-44 party-line vote, falling short of the 60 votes needed.

    —-CNBC

    https://www.cnbc.com/2020/10/21/coronavirus-stimulus-update-senate-relief-bill-blocked-as-pelosi-mnuchin-talk.html

    They don’t want there to be any alternative to the House $2.2 trillion stimulus package. If the bill doesn’t bail out California’s, Illinois’, and New York’s state employee’s pension system, then the Democrats don’t care–about extending unemployment benefits, etc. Here’s to hoping the Republicans in the Senate refuse to budge.

    P.S. Joe Biden is a crook.

    1. You’re right: Joe Biden is a corrupt man. He should be nowhere near 1600 Pennsylvania Avenue.

      1. But isn’t that the address where we put our most dangerous criminal?

        1. facts not in evidence.

    2. I don’t know why you’re upset. I’d prefer no stimulus bill. We got no stimulus bill.

    3. teh Dems are blaming the GOP for it not passing. oh well

      1. lol… And they think that’s suppose to be an insult on the GOP???
        The GOP doesn’t support communism – How dare they!!!

    4. Perhaps McConnell should implement the Democrats strategy to change Senate rules to ban all filibusters, and allow 51 votes to pass all bills.

  9. I’m Joe Biden and I approve of these tariffs and trade wars. My successor Caramela will support me I swear on my middle class values. She’s so clean and smart not like those others who wanted to bus their kids into my enclave.

  10. In the meantime, US booze consumption has increased 23% this year, so the market has remained remarkably stable. Unlike my liver enzyme test stats.

    1. The movement and other restrictions have taken a toll on us all.

    2. I did my part. As soon Covid hit, I started drinking every night after work, on the assumption that it would be a 1 month, minor binge. Man was I way off.

  11. In other news: looks like Rudy’s a pervert.

    1. looks like a consenting situation? Rudy should know better than to fall for that but then again maybe it happens all the time, nothing unusual for those in power?

    2. https://www.nydailynews.com/news/politics/ny-nyc-borat-rudy-giuliani-20201021-qxm25e2kwfgkhl5zxmurr46arm-story.html

      That is absolutely hilarious. Giuliani takes over the top position, formerly held by Ron Paul, for most embarrassing GOP politician taken in by Sacha Cohen.

      So glad he dropped out of the GOP Primary in 2012.

  12. Those industries are already facing “incredible economic harm due to the mandatory closings of restaurants, bars, and distillery and winery tasting rooms in response to the outbreak of COVID-19.”

    Don’t worry, your bailout is coming.

  13. I Am Earning $81,100 so Far this year working 0nline and I am a full time college student and just working for 3 to 4 hours a day I’ve made such great m0ney.I am Genuinely thankful to and my administrator, It’s’ really user friendly and I’m just so happY that I found out about thist… Check The Details…Click here.

  14. I made 10k dollar a month doing this and she convinced me to try. The potential with this is endless. Here’s what I’ve been doing Please visit this site…Click here.

  15. Try looking at European ag laws and get back to me. Think I’ll pick up some more whiskey tomorrow one my 1 day off. I’ve worked through this whole mess of a year .

  16. Fantastic work-from-home opportunity for everyone… Work for three to eight hours a day and start getting paid in the range of 7,000-14,000 dollars a month…
    Weekly payments…Click For Full Detail.

  17. Meh. How long before the euro-nannies outlaw alcohol?

  18. Sculptures depicting people, animals, or objects are called statues. The statues can be made of any material, but the techniques are different. The round-humpback statues depict being fully human, the busts depict human beings from the shoulders up, while the equestrian statues depict riding models; most equestrian statues depict historical figures.

    In terms of modern art, the kinetic Sculptures is the branch of Sculptures that belongs to kinetic art. The work of art is perfect when the viewer observes The Sculpture in motion. Like any other means of artistic expression and sculptures, it is constantly evolving. Whether used for decorative, commemorative, or architectural purposes, The Sculptures is one of the most complex arts.

  19. Getting paid easily every month from home by doing very easy and simple job from home. I have received my 3rd paycheck of $19852 last month from this home based easy job in part time. Every person can get this job and start making real cash online by follow details here..  Read More  

  20. The price of Bourbon in the US is still very low, and it tastes oh so good.

  21. What this leaves out is the other, pre-existing layers to the trade wars with Europe. It is not just aerospace subsidies. Europe is essentially closed to much of American agriculture due to regulatory barriers. They wrap it in a veneer, but it is straight protectionism. The value of these barriers is many multiples of the entire distilled spirits industry.

    Trump seems to wield these things as tactical weapons. They are not an end to themselves, but a tool to obtain an objective. Given appropriate (or lucrative) concessions, he will turn on a dime….. Declaring victory with the imposition of a tariff and with the deal to remove it.

    Unfortunately, expressing a content version of this rational is counterproductive (if it were even possible for our protagonist), and our press is exceedingly simple-minded… So we get panic stories about every intermediate step along the way, which is rather rich coming from a class who love to write think pieces lamenting the fact that politicians cannot see beyond the next election.

    1. Cogent. Jeez google. It is a perfectly cromulent word.

  22. I get paid more than $120 to $130 per hour for working online. I heard about this job 3 months ago and after joining this i have earned easily $15k from this without having online working skills.Visit here to earn thousands of dollars

  23. Because drinking a lot less is soooooooooooo unhealthy.

    But hey, I’m sure that you Conservatives have no problems with the Maker/Contributor Blue States subsidizing your increased healthcare costs due to your over consumption of alcohol.

Please to post comments

Comments are closed.