If you think the trade dispute between the Trump administration and the European Union has hit you hard, wait until you hear how craft distillers in the US have been affected. Industry expert Ian Buxton looks into the rights and wrongs, winners and losers in the battle of the tariffs.
Now I don’t know if you’ve noticed but the price of some American whiskeys has been going up. And some craft whiskeys which we hear about on this side of the Pond seem unduly hard to find. What’s going on?
It’s all Donald Trump’s fault. Well, the Donald would blame someone else, of course, and he’s been quick to point the finger at Airbus Industries and the European Union. But he may have a point.
Just over a year or so ago the World Trade Organisation (WTO – an acronym you’ll hear a lot more frequently if the UK does indeed finally execute a no-deal Brexit) determined that EU aid to Airbus constituted an illegal subsidy that disadvantaged Boeing, its main competitor. So, seeking to Make America Great Again and punish the EU, President Trump imposed stiff tariffs on imported steel and aluminium.
Rather than backing down, the EU retaliated with its own new tariffs, including a stinging 25% rate on American whiskies. As some cynical commentators observed, this may not have been unrelated to the fact that much US distilling takes place in the Southern states that tend to vote Republican. Politics, eh – it’s a dirty game.
As a result, prices have risen and major European importers have cut back their orders. In fact, for the 12 months to July, US whiskey exports to the EU fell by a massive $160m as around one-fifth of the sales just dried up. The folks at Brown-Forman, who make around 60% of the US whiskey we drink, have been especially hard hit. We’re talking about Jack Daniel’s, Woodford Reserve, Old Forester and Early Times – all fine products and justly popular. In their most recent financial results, Brown-Forman reckon they’ve lost around $125m in sales. Even for an industry giant that’s got to hurt.
This dispute has been grumbling along for nearly 15 years but, under Trump, the American response has been increasingly robust. In fact, reports suggest his administration is preparing to slap tariffs of up to 100% on $1.8 billion worth of European spirits and wine, with potentially dire consequences for Scotch whisky and British gin (never mind Cognac; the French can look after themselves!) The US distilling industry trade body DISCUS is urging restraint, fearing tit-for-tat European retaliation. “American whiskeys have become collateral damage,” said Chris Swonger, DISCUS’ head honcho.
Brown-Forman is big and profitable, it’ll get over it. It’s a rather larger problem for small craft distillers who add such variety to the scene, especially when they’ve invested in new bottles and packaging. Well, according to Mountain Laurel’s owner Herman Mihalich (they make Dad’s Hat Pennsylvania Rye, but his European distributor has stopped ordering) “we went from a marginally profitable business to breaking even.” Prior to the new tariffs, Europe accounted for around 10% of his sales but these dried up almost overnight.
That feels bad enough, but consider the plight of Catoctin Creek Distilling Co. in Virginia, who have thousands of unfilled bottles just waiting for their tasty rye whiskey. What’s the problem: just fill ‘em up and sell them in your own backyard, you say. Well, there’s the rub – they can’t. Owner Scott Harris was all geared up for a European sales drive and, just ahead of the tariff spat, invested in 70cl bottles for Europe. Sadly, they’re useless in the USA where the law says spirits must be sold in 75cl containers The difference is only the size of a mini but means a mountain of expensive glass that he can’t use.
As he told the Reuters news agency: “We had one distributor we signed a deal with. He just stopped returning our phone calls. We’ve been trying very hard to get into the UK and France, and we can’t get any distributor to talk to us right now.”
Well, as the poet would have it,
The best-laid schemes o’ mice an’ men
Gang aft agley,
An’ lea’e us nought but grief an’ pain,
For promis’d joy!
For you and me all this means little more than not getting our favourite craft bourbon or rye this Christmas, or having to pay more. For employees of US distilleries affected by this trade war, it could get worse – DISCUS are warning of thousands of job losses if the dispute continues. But I have a plan. As I note in the recently-released latest edition of my 101 Whiskies to Try Before You Die, Canadian whiskies are a steal. You can thank me later.