Kane's Beverage News Daily

The European Union and the U.S. agreed to return to zero-for-zero tariffs on distilled spirits,  ending a trade war that began during the Trump Administration.  The EU had been set to boost tariffs on various U.S. products — including American Whiskey, Harley-Davidson motorcycles, Levi Strauss & Co. jeans including bourbon –to 50% on Dec. 1.

“Since the imposition of the EU tariffs, American Whiskey exports to the EU, the U.S. spirits industry’s largest export market, have plunged 37%, from $702 million to $440 million (2018-2020). We have a long way to go, but are fully committed to building back American Whiskeys better in the EU,” said Chris Swonger, president/ceo, Distilled Spirits Council of the U.S.. For three years, DISCUS led a coalition urging lifting of the tariffs. 

“Cheers to the Biden administration for their dogged determination to reset trade relations with the EU and bring a stop to the needless damage being done to U.S. businesses caught up in this trade war. The end of this long tariff nightmare is in sight for U.S. distillers, who have struggled with the weight of the tariffs and the pandemic. It’s time for the UK to lift its tariff on American Whiskeys so we can all get back to toasts, not tariffs,”  Swonger said.

The Kentucky Distillers Association said it was “thrilled” at the announcement and noted that “these unfortunate tariffs have slashed exports of Kentucky Bourbon by 50% to the EU and United Kingdom, costing distillers, industry partners and farm families hundreds of millions of dollars. Kentucky Bourbon exports had enjoyed double-digit growth for a decade before the tariffs were imposed in 2018.”

KDA noted that Bourbon is an $8.6 billion economic and tourism engine that generates more than 20,000 good-paying jobs each year with a $1 billion payroll and welcomes nearly two million people a year to the KDA’s Kentucky Bourbon Trail experiences.

Kentucky distillers also are in the middle of a $5.1 billion building spree to meet the growing global thirst for America’s only native spirit, KDA said, adding there are a record 10.3 million barrels of Bourbon aging in Kentucky, the most in the Commonwealth’s 200-year distilling history.

Separately, the “Toasts Not Tariffs Coalition,” which consists of 50 trade associations representing all three tiers of the bev/al industry, issued a statement saying the “EU is a critical export market for American Whiskey producers. Securing the removal of the retaliatory tariff on American Whiskeys provides a boost not only to U.S. distillers across the country, but also to the entire U.S. supply chain from grain to glass. This renewed relationship will increase exports and job growth.

“Returning to duty-free trade for all distilled spirits also brings much-needed certainty to hospitality businesses on both sides of the Atlantic, many of which continue to be negatively impacted by the pandemic,” the coalition said, adding:  “It’s time for the UK to lift its tariff on American Whiskeys and eliminate the threat of additional tariffs on American wine so we can all get back to toasts, not tariffs. ”

Distilled spirits was collateral damage in the dispute which was over steel and aluminum exports that affected more than $10 billion of exports each year.  The agreement maintains the existing section 232 tariffs on steel and aluminum but allows limited amounts of EU steel and aluminum to enter the U.S. tariff free.

The allies agreed to negotiate a carbon-based arrangement on steel and aluminum trade.  The accord also contains provisions to prevent steel produced in China from being re-exported duty free to the U.S. via the EU.

The dispute started in 2018 when the Trump Administration imposed duties on steel and aluminum from Europe, Asia and elsewhere, saying increased shipments into the U.S. posed a threat to national security because they had diminished the production capacity of U.S. steelmakers.

The EU then retaliated, targeting products that included not only steel and aluminum but also Harley-Davidson motorcycles, Levi Strauss & Co. jeans and bourbon.

White House national security adviser Jake Sullivan said the tariff agreement removes “one of the largest bilateral irritants in the U.S.-E.U. relationship.”

The tariffs did benefit U.S. steelworkers.  Commerce Secretary Gina Raimondo said the tariffs “helped save American jobs in the steel and aluminum industries” and the left-leaning Economic Policy Institute said the tariffs created more than 3,000 steelmaking jobs.

The American Iron & Steel institute praised Raimondo and U.S. Trade Representative Katherine Tai for maintaining enough of the tariff to “prevent another steel import surge that would undermine our industry and destroy good paying American jobs.”

The United Steelworkers Union, which represents about 60, 000 workers in basic steel and another 17,500 in aluminum,  said it “supports the interim agreement between the U.S. and the EU.”  It said: ““Steel and aluminum are the backbone of our nation’s defense and critical infrastructure, but for too long, global overcapacity and targeted predatory practices undermined domestic production and employment.

“This new arrangement, which will maintain but modify Section 232 measures on steel and aluminum from the EU, will create a framework that will ensure U.S. domestic industries remain competitive and able to meet our security and infrastructure needs.

“It will also provide a much-needed opportunity to address the non-market predatory practices of China and other countries that have distorted global markets, while also spurring a dialogue over climate concerns stemming from countries whose industries are far more carbon intensive than those in the United States and the EU.

“Under this arrangement, the United States will allow a basic overall level of steel imports, which will measure less than those that came from the EU in 2017 and 2018. Above this level, imports will be subject to a 25% tariff. The deal creates certainty both for domestic producers of steel and users who are unable to find domestic supplies.

“Under the interim arrangement, steel imports from the EU must entirely be produced in the European Union, commonly known as ‘melted-and-poured.’ This will help ensure European and U.S. steelworkers are not losing jobs to countries outside this agreement. 

“In aluminum, the Biden administration reached a parallel arrangement with the EU that ensures the U.S. has the capacity to meet its critical needs and allows for limited amounts of downstream products. 

“As we look to the future of our industries and jobs, it will be vital to rein in global overcapacity, stemming largely from Chinese Communist Party’s state-led trade practices,” the USW said. “Engaging with our allies is a necessary step in this process, and this arrangement offers a path forward toward working together to address this larger concern. 

“Combatting climate change will also require coordinating with our partners. Both the U.S. and European industries have demonstrated a commitment to reducing the carbon intensity of their products, and working together will ultimately provide results for workers and our environment.”