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Tariff Troubles Slow American Whiskey’s International Expansion

February 21, 2019

The growth of American whiskey outside the United States has been a boon to U.S. distillers recent years, but that progress stalled in the latter half of 2018 owing to trade tensions between the U.S. and its major global partners.

Exports of American whiskey took a sharp hit following the mid-2018 implementation of retaliatory tariffs across the most important global whiskey markets, according to data from the Distilled Spirits Council of the U.S. The tariffs, levied in response to the U.S. administration’s higher levies on steel and aluminum, range from 10% in Canada to 25% in the E.U. and Mexico. In addition, all U.S. spirits face a 15%-30% tariff in China.

According to the data, global exports of American whiskey fell by 8.2% to $526 million from July-November 2018 year-on-year, after growing by 28% to $595 million in the first half of the year. In the E.U.—the largest export market for American whiskey—shipments surged by 33% to $363 million from January-June, but slumped 8.7% to $312 million from July through November, after the tariffs took effect.

“Whiskies account for roughly 70% of all U.S. spirits exports,” says Christine LoCascio, the Distilled Spirits Council’s senior vice president for international affairs. While stressing that the tariffs harm all distilleries, LoCascio highlighted some of the specific damages done to smaller companies, adding, “Several U.S. craft distillers felt the effects of the tariffs immediately, from canceled export contracts to solid sales leads that dried up overnight.” According to LoCascio, “some companies have also reported that the cost of the tariffs has wiped out all the benefits from the 2017 tax reform legislation.”

Speaking directly to the struggles of smaller distillers, Michter’s president Joe Magliocco says that despite an overall strong year for exports, the tariffs are creating uncertainty. “Nobody knows what the future’s going to bring,” he says. “We believe that once the tariff situation stabilizes a bit, and once the ground rules are clear, country-to-country, there’s still tremendous global opportunity for American whiskey.”—Shane English

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