Whiskey, the time-honored drink of the lovelorn and loveless, might be a comfort to Americans, but the industry can join its drinkers on this year’s Valentines Day in wallowing in loss: Tariffs have dealt a serious blow to its export business.
When President Trump imposed tariffs on aluminum, other countries retailed with tariffs on American whiskeys, including bourbons and ryes.
On Tuesday, the Distilled Spirits Council made clear just how painful that trade war has been when it released its annual report. During the first six months of 2018, before the new tariffs took effect, the industry saw a 28 percent year-over-year increase in exports. Once subject to new taxes from Canada, Mexico, China, and the European Union, however, exports fell by 8 percent compared to the year before.
In the EU alone, after it imposed 25 percent tariffs in June 2018, whiskey exports fell by 8.7 percent compared to the same period in 2017. The introduction of a 10 percent tariff by Canada in July had a similar effect — dropping sales in the country by 8.3 percent.
That’s a big hit for the industry and a clear example of how Trump’s protectionist tariffs and the ensuing trade war have hurt U.S. businesses.
As Christine LoCascio, the council’s senior vice president for international affairs put it: “For the first time, data can demonstrate the negative impact of retaliatory tariffs on what had been a booming export growth story.”
Those concerns were echoed by the American Distilled Spirits Association. In an editorial board meeting with the Washington Examiner in 2018, Matt Dogali, that group’s president and CEO, pointed out that it wasn’t just retaliatory tariffs digging into profits, but tariffs imposed by the U.S. on glass imports under Section 301 that were meant to push back on China.
As Dogali explained, since the U.S. doesn’t produce much glass, “There’s not just excess glass production just lying around waiting to be capitalized on.” That means that for distillers who bottle their product in glass containers, some of which are sourced from China, tariffs on glass are costs that either have to be absorbed or passed on to consumers. He pointed out that this would be even more of a problem if current tariff rates of 10 percent were raised to 25 percent as threatened by Trump if no deal is reached with China.
Whiskey distillers, of course, aren’t the only ones to have taken a hit from the trade war. Indeed, in October 2018, U.S. companies paid more than $6.2 billion in tariffs or 104 percent more than they had paid in October 2017.
That’s a lot of extra taxes for the American companies that Trump claims to want to help to be paying. For whiskey producers, at least their products have led to some great songs about loss that fit the moment.
