On Tuesday, March 22, the British government said it would end the 25% tariff that had been imposed on U.S. goods like whiskey in 2018. The deal goes into effect on June 1, 2022, establishing the return of duty-free trade in spirits across the Atlantic.
“Distillers throughout the United States are cheering the end of this long tariff nightmare,” says Chris Swonger, president and CEO of the Distilled Spirits Council of the U.S. (DISCUS).
The 2018 tariffs on U.S. goods like whiskey, peanut butter and jeans were a retaliatory response to the Trump administration’s taxes on steel and aluminum from the European Union (E.U.), which at the time included the United Kingdom.
The news provides additional relief for U.S. producers who say that the 2018 tariffs caused a “significant slump” for exports in 2019 and 2020. E.U. tariffs impacting whiskey were lifted in January 2022, and in March 2021, an agreement between the E.U. and U.S. lifted tariffs for U.S. wine, along with certain other domestic spirits.
The U.K. is the fourth-largest market for American whiskey exports, according to DISCUS. Since the imposition of the 25% tariffs, exports to the U.K. had declined 42%, from $150 million in 2018 to $88 million in 2021.
Craft distilleries, many hit particularly hard by the tariffs, applaud the move. Many continue to focus on rebuilding momentum lost over the past few years.
“For us, it’s been a long wait,” says Scott Harris, cofounder of Virginia craft distillery Catoctin Creek. In 2018, the company paused plans for broad European expansion due to the tariffs.
“We never left the U.K. market when the tariffs were imposed, choosing to wait out the price hikes,” says Harris. “However, our business was slowed to a trickle during the tariffs. We’re happy now that we’ll be able to adjust our pricing going forward and compete on an equal basis.”
The U.K. is the fourth-largest market for American whiskey exports.
Chicago-based Koval Distillery has been selling its products to the U.K. for about a decade.
“We noticed a significant drop in distributor and retail confidence in American brands due to the tariffs,” says Dr. Sonat Birnecker Hart, Koval’s president. “In turn, the momentum that we had gained slowed. Now that the tariffs are lifted, we have seen greater interest and communication from our partners abroad.”
When the tariffs were first imposed, New York Distilling cofounder Tom Potter described the chilling effect on orders as “like an asteroid hitting your planet and changing everything.” Today, the Brooklyn-based craft distiller is “thrilled and relieved” to see the U.K. tariffs go.
“Before the imposition of tariffs, the U.K. was our largest and fastest-growing export market,” says Potter. “Those lost sales during the tariff years really hurt us. We’re excited to return to the U.K. freed from the burden of punitive tariffs.”
Of course, the removal of tariffs has implications beyond craft distilleries.
“These significant agreements will benefit U.S. workers throughout the entire alcohol supply chain, including farmers, distillers and vintners as well as those who distribute and sell the products at restaurants, bars and spirits and wine stores,” says a representative from The Toasts Not Tariffs Coalition, an industry group composed of 50 U.S. trade associations across the entire three-tier chain of the U.S. beverage alcohol sector.
With the whiskey-related tariffs now in the rearview mirror, some organizations take the opportunity to express resentment about the retaliatory nature of the tariffs, which were imposed in relation to matters unrelated to spirits.
“A product’s strong geographic identity should not make it a target in trade disputes focused on airplanes or steel or aluminum,” says Matt Dogali, CEO of the American Distilled Spirits Alliance, a trade group representing spirits brands, importers, exporters and manufacturers in the U.S. “When countries adhere to a zero-tariff policy, trade grows on both sides. This is especially true for whiskies, which have unique and strong brands produced around the world—and whose distilleries often sell whiskies from abroad alongside their own product.”
While U.S. distilleries are pleased to see U.K. tariffs recede, for some, optimism was tempered by ongoing concern about supply chain and other issues.
The removal of the U.K. tariffs on American whiskey “marks a happy day,” says Amir Peay, owner/operator of Lexington, KY-based James Pepper Distilling. “It will take us a bit of time to regain our lost mojo in the market due to supply chain issues and stock constraints, but nonetheless this is an overwhelmingly positive development in a very important market.”
Peay is looking toward upcoming opportunities and implications, too.
“We also still have one more important goal in the not-too-distant future, and that is the complete removal of tariffs in the E.U., as they tentatively set to come back on in late 2023.”
Published: March 29, 2022