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Drinks Industry Groups Say Tariffs Already Impacting The Business

January 15, 2020

With the trade battle between the United States and the European Union ongoing—and the U.S. currently considering extending tariffs to all E.U. wines and key spirits categories like whiskies and Cognac—drinks industry organizations say that the negative effects are already being felt across the business and are urging that the two sides ratchet down trade tensions.

In a letter to the general counsel of the office of the United States Trade Representative (USTR), a coalition of beverage alcohol trade groups—including Distilled Spirits Council, The Wine Institute, the Wine and Spirits Wholesalers of America, and the National Restaurant Association, among others—wrote that U.S.-based companies are decreasing investment, canceling jobs, and increasing prices, with more damage to come if the tariffs continue or are raised.

“Since tariffs (on French, Spanish, and German wines and single malt Scotch whiskies) were imposed in October 2019, there is clear evidence that the U.S. beverage alcohol industry has been negatively impacted as a direct result,” the groups stated. According to an analysis by DISCUS, nearly 80,000 industry jobs are ultimately at risk if the trade war continues.

Included in the comment to the USTR were several specific examples of unnamed companies currently pulling back on investments in response to the tariffs—including delaying brand launches and reducing staff levels. Among them, “A U.S. spirits company that employs approximately 400 people in the U.S. projects that it will lay off staff and increase prices if the 25% tariff remains in effect through 2020. If the tariff is increased to 100%, they anticipate that they will be forced to make significant cuts to their U.S. workforce.”

While tariffs on E.U. wines and spirits in the U.S. are squeezing importers here, retaliatory tariffs on U.S. wines and spirits in the E.U. and China are causing the export climate for American producers to deteriorate as well. “American wine exports to China were down 48% through the first three quarters of 2019, and American whiskey exports to the E.U. declined 29% between January 2019 and November 2019 as compared to the same period in 2018,” the industry comment noted.

Separately, the Wine Institute and its European counterpart Comité Européen des Entreprises Vins (CEEV) have signed a new document “recognizing the importance of the Transatlantic wine trade and calling for the immediate elimination of all tariffs on wine.” The U.S. and the E.U. are each other’s largest export markets, the two trade groups noted, with total trade reaching $5.33 billion (€4.66b) in 2018.—Shane English

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