Distilling in the News: Resolving Trade Disputes

There are positive signs that the tax and trade war that was started to counter moves in industries that have nothing to do with the spirits industry may be coming to a close. July 11th will mark the end of EU and US retaliatory tariffs on spirits for at least 5 years, possibly more if the measure is renewed. This should open US distillers to tap into demand in European markets (and vice versa) and to help struggling restaurants and bars in those countries diversify their offerings and hopefully attract clientele after a challenging year.

This saga started in 2019 when a series of rulings on subsidies for US and EU airplane manufacturers led to retaliatory tariffs. The WTO found that the EU gave illegal subsidies to Airbus and the US placed tariffs on an estimated $7.5 Billion worth of tariffs on European spirits including wine, scotch, whiskey, cognac, and various liquors. A year later when the WTO found the US’s subsidies to Boeing were also illegal the EU placed an estimated $4 Billion in tariffs on US rum, brandy, and vodka. In both cases, the increase amounted to a 25% tariff on each of these products.

Resolving Trade Disputes

American Whiskey is still being taxed as part of a separate dispute on steel and aluminum, however, the rate is maintained at 25% instead of being increased to 50% as previously planned. The deferment of the tariff increase is a step in the right direction but it doesn’t solve the underlying issue. Whiskey exports from the US have dropped almost 30% since the trade war started and maintaining the status quo will not undo the damage to the industry.

These recent developments are a net positive for the US and EU spirits industries but there’s still work to be done before the damage caused by the trade disputes is fully resolved. Hopefully, success begets success in this arena and a more fair arrangement can be reached.