Free Trade

American Distillers Face a Double-Shot of Tariffs in June. Will Biden Save Them?

Biden's new trade representative should outline a plan to remove the economically nonsensical and politically pointless tariffs on European steel and aluminum in order to deescalate this costly conflict.

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Before the tariffs hit, Sonat Birnecker Hart's Chicago-based distillery was seeing exports to Europe and the United Kingdom grow by about 25 percent annually.

It's been a different story for KOVAL Distillery recently, with sales across the Atlantic down 60 percent since whiskey got caught up in a trade war. "This erodes years' worth of effort by our team to get onto European shelves," Hart writes in an op-ed for The Washington Post. "The longer we're off these shelves, the harder it will be to get back on them."

The tariffs that have wrecked Hart's ability to grow her brand overseas were imposed in retaliation to the Trump administration's tariffs on steel and aluminum imported from Europe. Since June 2018, the European Union has applied 25 percent import taxes on American whiskey and a variety of American agricultural goods including corn, orange juice, peanut butter, and tobacco products.

Combined with the economic impact of the COVID-19 pandemic, the tariffs have forced Hart to scale back significantly: closing the distillery's tasting room and laying off employees. Across the industry as a whole, American whiskey exports to European countries have declined by 53 percent since the tariffs were imposed, according to trade data tracked by the Distilled Spirits Council of the United States (DISCUS), an industry group.

And now another major hurdle looms on the horizon. Unless the U.S. reaches a deal with Europe to roll back the Trump-era tariffs before June 1, the European tariffs will automatically double from 25 percent to 50 percent.

That's one of the first significant deadlines looming for the Biden administration as it navigates (and at least partially embraces) the haphazard trade environment left by Trump. When the Senate convenes next week for a confirmation hearing on Biden's pick to be the U.S. trade representative, Katherine Tai, members should demand a plan to avoid that scheduled tariff hike.

The tariffs on Chinese imports that came to define Trump's trade agenda have been economically damaging, but Biden appears unwilling to discard them for fear of losing the domestic political benefits that come with standing up to China. The U.S.-E.U. front of Trump's trade war, meanwhile, is economically nonsensical and politically pointless—it is causing unnecessary pain to American businesses and the economies of longtime allies without providing any apparent benefits (even vacuous, populist ones).

Further complicating things is a mostly unrelated set of tariffs imposed by the U.S. in 2019 on European cultural goods, including Scotch whisky and French cheeses, in response to what the U.S. sees as unfair E.U. subsidies for Airbus, a European airplane manufacturer. The dispute over airplane manufacturing subsidies predated Trump's election, but it came to a head alongside his other tariff maneuvers.

In short, at the same time that European tariffs on whiskey have hurt U.S. exports for American distillers, the U.S. tariffs on Scotch have raised prices for American consumers. It's a lose-lose mess.

"Hospitality businesses on both sides of the Atlantic have been decimated by the global pandemic, and these tariffs are a significant and unnecessary drag on their recovery," says Christine LoCascio, chief of public policy for DISCUS. "We are hopeful the Biden administration will clearly recognize the widespread damage being caused by the escalation of these trade disputes."

Last month, 72 trade associations representing booze businesses on both sides of the Atlantic sent a letter to the White House requesting the "immediate suspension" of tariffs on alcohol and other products unrelated to the underlying disputes over steel, aluminum, and airplanes.

And the U.K. seems eager to work out a deal. Reuters reported last month that British trade minister Liz Truss was seeking a meeting with Tai to specifically discuss the U.S. tariffs on Scotch whisky.

With Britain having left the E.U., it makes little sense for the Biden administration to continue punishing Scotch producers and consumers for the crimes of the European government. But it's probably true that the only way to avoid a June 1 escalation of the E.U. tariffs on American whiskey is for the Biden administration to abolish Trump's tariffs on steel and aluminum. Tai should outline a plan to do exactly that at her confirmation hearing next week.

Until then, however, KOVAL Distillery and other American whiskey-makers are caught in the middle of an awful political mess. Almost no one wants the retaliatory tariffs on whiskey to remain in place, but policy inertia might cause them to worsen before they get better.

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  1. “Biden’s new trade representative should outline a plan to remove the economically nonsensical and politically pointless tariffs on European steel and aluminum in order to deescalate this costly conflict.”

    —-Eric Boehm

    LOL

    “President Joe Biden said he would keep U.S. tariffs in place on aluminum imports from the United Arab Emirates, reversing a last-minute move by his predecessor to grant the Gulf nation relief from the duties.”

    —-Bloomberg, February 2, 2021

    https://www.bloomberg.com/news/articles/2021-02-02/biden-overrules-trump-on-uae-tariff-keeping-aluminum-duties

    Biden reinstated aluminum tariffs on the UAE to please the unions–despite Trump giving the UAE a pass on aluminum tariffs as a reward for making nice with Israel. Arguing about what unaccountable politicians like Biden should do is absurd after the election, anyway. The real argument was about what voters should have done before the election, and now the real argument is about what voters should do in the next election.

    I suppose it’s time to start looking at purple districts and primary races. Whatever argument there is for more trade is likely to come from those who don’t badmouth capitalism and are opposed to socialism. The Democrats losing control of the House in 2020 can only improve that situation.

  2. I remember those good old halcyon days of when Murica would sell arms to Europeans so they could kill each other.

    Are sales slumps related to tariffs or taverns being closed due to covid and folks having less income due to shutdowns? Boutique whiskey is a luxury good with specific brands being “look at what I have.” Some Romanian acquaintances in RO like their Jack Daniels and likely wouldn’t be switching to a local palinca due to a tariff.
    If Guinness were tariffed more, would American stout lovers switch to Budweiser?

  3. When it comes to Biden, Reason is like a battered wife who thinks THIS time he’ll sober up and behave

    1. Mmmm. Deep fried battered reason.

  4. “American Distillers Face a Double-Shot of Tariffs in June. Will Biden Save Them?”

    no. no he will not.

  5. I’m a free marketer. As such theoretically I would be opposed to all tariffs so how would that work? Production would settle in places best suited to do such. Mining would happen where desired materials exist. Those places with the cheapest labor, and least restrictions would flourish, The same with manufacturing, and R&D.
    This would result in some parts of the globe being industrial wasteland, which has been the case and is the case. Progressive reforms have corrected those issues, for better or worse, in the UK & US. Middle class lifestyles have been preserved in 1st world via protectionist tariffs. If removed do we/ should we go full blown Geo. supremacy? Consumer 1st & 2nd worlds & 3rd world producer slaves? The stumbling block is the disparity of skill within states more so than between states. Do we export our bottom dwellers to 3rd world labor camps and import 3rd & 2nd world elites and potential?

  6. I promise to do my part and drink only Tito’s (Texas) vodka and Makers Mark (Kentucky) whiskey.

  7. Wait, there arent tarriffs on scotch? Or the grape’s counterpart to corn’s whiskey?

    GTFOH with that one sided free market shit. If I cant get my cognac without being raped by the french, they can bend over and take it for bourbon. (Lets be honest, nobody wants sour mash)

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