As distillers await the latest round of tariffs, the spirits industry is looking to the example of plunging U.S. whiskey exports to argue for free trade.
The European Union's retaliatory tariffs levied on American whiskey caused E.U. imports of the drink to plunge 27% to $514 million in 2019, the Distilled Spirits Council said Wednesday.
The industry group has been lobbying for an end to the tariffs since the 25% tax was enacted in mid-2018 in retaliation for U.S. tariffs levied on imported steel and aluminum.
Another trade dispute with the E.U., related to the long-running disagreement over subsidies for Airbus and Boeing, has led the White House to weigh imposing 100% tariffs on cordials, liqueurs and single-malt Scotch, among other European imports.
"Impact on single-malt Scotch or cordials or liqueurs impacts major U.S. investment here," said Chris Swonger, president and CEO of DISCUS.
The deadline for public comment on the latest round of tariffs is Thursday, meaning that the Office of the United States Trade Representative could announce a decision this week.
American whiskey accounts for 65% of all U.S. spirits exports, according to the industry trade group. And the European Union is its top market. DISCUS is using the decline of the U.S. whiskey export market to lobby the White House.
"On the U.S. side, a 27% decline in value is certainly something that resonates," Swonger said.
The United Kingdom, which was the top market for U.S. whiskey in 2018, imported $101 million of U.S. whiskey last year, cutting its imports by nearly a third from the previous year.
Craft distiller Tom Potter, president of the New York Distilling Company, said that the damage is not only monetary. Exporting less American whiskey hurts the drink's ability to compete with the reputation of its Scotch counterpart, which is usually considered superior.
"We were finding really sophisticated buyers, in world capitals, beginning to think about American bourbon and American rye the same way that they thought about Scotch whiskey," Potter said. "And at this point, we're now frozen. To some extent, if you're not in the market, you're going to be forgotten."
Potter's distillery was projecting that exports would account for a quarter of its sales in 2018. But that changed in mid-2018, when the introduction of tariffs froze all of its foreign sales. Potter estimated that exports now make up only about 7% of the company's sales and expects that they will continue to decline.
DISCUS has accepted some funding from the U.S. Department of Agriculture's program to mitigate the retaliatory tariffs. The group is using the money to promote the U.S. spirits exports, particularly in countries without tariffs on American imports.
Swonger said that the council has seen some positive signs in recent weeks. He pointed to President Donald Trump's meeting with E.U. officals at the World Economic Forum in Davos, Switzerland as one cause for optimism.
The U.S. spirits industry will see some relief on Friday, when tariffs on U.S. rum and vodka exports to China will be reduced to 35% as part of phase one of the trade deal with the Asian country.
Despite trade tensions, overall volumes of spirits in the U.S. rose 3.3% in 2019.
