DELIGHT AT TARIFF SUSPENSION BY EU UNTIL MARCH 2025

A deal to avoid the reimposition of tariffs on American whiskies from 1 January 2024 by the European Union has been broadly welcomed by the Distilled Spirits Council of the US (Discus), the national trade association representing producers and marketers of distilled spirits sold in America.

Discus president & CEO, Chris Swonger said in a statement: “We greatly appreciate the efforts of the Biden administration to secure an extended suspension of the EU’s retaliatory tariffs on American whiskies. This agreement (until 31 March 2025) is welcome news for US distillers across the country who were facing the reimposition and doubling of the EU tariff to 50% this year.”

The long-running saga has its roots in a dispute between the United States and the EU over steel and aluminium imports that began about five years ago. In June 2018, the EU imposed a 25% retaliatory duty on American whiskies in response to American Section 232 tariffs on steel and aluminium. Other sectors that were affected by the EU tariffs included, for example, Harley Davidson motorcycles and power boats.

Falling export values

The move had a dramatic effect on the US spirits industry with American whiskey exports to the EU – the largest export market for this spirits segment – plunging by 20% between 2018 and 2021. The export values fell from $552 million to $440 million and were on a downward slide until 2020.

Then, in October 2021, both sides agreed to suspend the EU’s 25% retaliatory tariff on American whiskies for two years starting from 1 January 2022. This resulted in an immediate turnaround in exports to the EU. They increased by 29% in 2022 compared to 2021, reaching $566 million, exceeding the pre-tariff level of $518 million in 2017. The 2022 figure accounted for 44% of all American whiskey exports.

The fluctuations underline the sensitivity of spirits segments to tariffs, and more so during a post-Covid period of higher product costs and squeezed consumer spending power. According to the latest data from Discus, through to October 2023, American Whiskey exports to the EU were up again by nearly 64% compared to the same period in 2022 (January-October).

Commenting at the end of December on the latest tariff rate quotas (TRQs) reprieve, United States trade representative Katherine Tai said: “The United States is committed to defending workers, communities, and domestic industries from global non-market overcapacity and excessive carbon emissions. By extending the European Union’s steel and aluminium TRQs for an additional two years, we can continue negotiations on a forward-looking, high-standard arrangement.”

Long-term predictability

Discus is now looking for more stability in relation to these tariffs through a full resolution rather than further extensions to give the industry some long-term predictability.

Swonger said: “We urge the Biden administration to continue striving for a permanent end to all debilitating tariffs in disputes unrelated to the spirits sector. Until the threat of these tariffs returning is fully removed, the uncertainty will continue to restrict American whiskey export growth in our most important international market.”

He added: “The US distilled spirits industry has worked hard to regain its footing in the EU market since the EU suspended its 25% tariff in January 2022 (and) has seen positive results. American whiskey exports to the EU bounced back to surpass pre-tariff levels.”

While the extended tariff suspension was welcome – allowing American spirits exporters to continue their marketing and sales efforts to highlight their products in the EU market – Discus will likely continue to lobby for a tariff-free deal. It wants one that does not tie its sectors to those – such as steel and aluminium as well as large civil aircraft – that are unrelated to it.

Before this latest agreement was announced, Discus had hoped that a resolution of the steel and aluminium dispute would have been reached at the EU-US Presidential Summit on 20 October last year. At the time the association said that it was facing the prospect of a reimposition of duties on its products, ingredients, and raw materials amounting to more than €1.3 billion ($1.43 billion) from 1 January. This has now been averted.

However, the large civil aircraft dispute still looms. These tariffs will return in June 2026 if a new agreement is not reached.

[Lead image credit: Decatur Wine & Spirits]

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