Fear. That one word sums up yesterday’s “Toasts not Tariffs” webinar organized by the Distilled Spirits Council of the U.S.
The fear is that today’s 25% retaliatory tariffs on wine and spirits will rise to 50% in the U.S.-EU trade dispute in just 50 days. If that happens, says Tom Mooney, the founder/ceo of Westward Whiskey (formerly House Spirits, it will just add to the miseries caused by Covid, which meant the loss of more than 80% of Westward’s revenue in just a month.
“We had hoped exports to the UK would help us rebound. We have invested time and money for 15 years in developing sales to the UK,” Mooney said. “Instead, we had to absorb the cost of a 25% retaliatory tariff to compete. We felt it wouldn’t be around forever, so we ate that cost.
“If the tariff escalates to 50% on June 1, we will no longer have a path to remain profitable. These trade wars have no winners. There will be job losses in Portland,” Ore., where Westward is based, “and job losses for our importer in England.”
“If this continues,” said Bill Thomas, owner, Jack Rose Dining Saloon in Washington, “it will be catastrophic.” Thomas has already had to deal with one catastrophe, the closure of Washington, D.C., bars and restaurants. It quickly pivoted to allow on-premise establishments to sell full bottles as well as cocktails to go. To survive, Thomas sold the more than 2,700 bottles of whiskey around the bar. He has continued buying and selling, and that has enabled Jack Rose to stay solvent. Indeed, before the webinar started, Thomas was scanning auction lists for whiskies he could bring in during the temporary abatement of that 25% tariff.
Of course, to do that he has to navigate and survive the chaos that represents the global shipping industry. When that cargo ship, the Evergreen, got wedged in the Suez Canal, it was symbolic of the plight of the entire industry, said Alison Leavitt, managing director of the Wine & Spirits Shippers Association (WSSA). Normally WSSA negotiates freight rates for its more than 700 members worldwide. But lately shipping costs have gone up 20% to as much as 60% overall and WSSA’s priority has been negotiating to simply get wines and spirits onboard ships.
European products “aren’t interchangeable with domestic products,” she said. You can’t simply swap a Napa wine for a Bordeaux, nor a single-barrel U.S. whiskey for a single-barrel Scotch whisky. The tariff war threatens to undermine U.S. jobs, she said, noting the “importers are big job creators. They were used to paying little or nothing. When the 25% tariff hit, an importer who was bringing in a container with product valued at $100,000 suddenly had to pay an additional $25,000 in duty. The immediate impact: A 30% reduction in French wine imports, and a similar cuts for German wines. This has already led to closures and lost jobs, she said, and if the tariff doubles to 50%, it will lead to massive closures and lost jobs.
Rep. John Yarmouth (D-Ky.), founder of the House Whiskey Caucus said he got 50 colleagues to sign a letter asking the Biden Administration to remove the tariffs. Yarmouth spoke to Biden, he said, and got an “indication” the President would work on that. Noting that distilleries have engaged in large expansions, betting “on being able to sell their product in the EU and elsewhere overseas,” Yarmouth said he is “determined to do everything (he) can to protect the bourbon industry.”
Rep. Andy Barr (R-Ky.) said that when Donald Trump was in the White House, “I tried to do my part,” speaking with the president and other officials. Resolution is tremendously important to Kentucky, he added, noting that 95% of bourbon consumed worldwide is distilled in Kentucky. “It’s a huge driver of growth and prosperity.”
The webinar was timed to coincide with a letter to U.S. Trade Representative Katherine C. Tai, Agriculture Secretary Tom Vilsack, and Commerce Secretary Gina Raimondo urging the immediate removal of all U.S., EU and UK tariffs on distilled spirits and wines imposed in connection to unrelated trade disputes.
“The EU and UK continue to impose a 25% tariff on American Whiskeys, including Bourbon, Tennessee Whiskey, American Rye Whiskey and American Single Malt Whiskey, which puts these products at a competitive disadvantage in those markets,” said the letter signed by the 48 members of the coalition. “The devastating impact of these tariffs on American whiskey in our most important export markets is clear; since these tariffs were imposed in June 2018, American Whiskey exports have declined by 37% to the EU and by 53% to the UK.”
The groups stated, “In exactly 50 days, the EU’s tariff is scheduled to double to 50%, further exacerbating the unlevel playing field in the EU market for American Whiskeys. Moreover, we are gravely concerned that if urgent action is not taken to lift these tariffs, many small U.S. distilleries will not be able to recover from the devastating impacts of both the tariffs and the pandemic.”
They concluded, “On behalf of producers, importers, wholesalers and retailers that comprise the U.S. hospitality sector, we commend the Biden Administration for working to reestablish positive relationships with the EU and UK. We urge you to continue this positive momentum by prioritizing the permanent removal of EU, UK, and U.S. tariffs on distilled spirits and wine, which will help support U.S. jobs and businesses as the economy continues to recover.”