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Whiskey makers face worsening hangover over trade dispute

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LOUISVILLE, Ky. (AP) A hangover from Trump-era tariff disputes could become even more painful for U.S. whiskey distillers unless their entanglement in a transatlantic trade struggle is resolved soon.

Bourbon, Tennessee whiskey, and rye whiskey have been left out of recent breakthroughs to begin rebuilding America’s trade relations with the European Union and the United Kingdom. Tariffs have been suspended on some spirits, but the 25% tariff applied to American whiskey by the EU and the UK remains in place.

The EU tariff rate is expected to double to 50% in June in the main export market for US whiskey makers.

A leading spirits advocate pleads with America’s top trade ambassador Katherine Tai not to leave whiskey producers behind. The United States Distilled Spirits Council urged her to push for an immediate suspension of EU tariffs and to secure deals to remove them.

Swiftly removing those tariffs will help support U.S. workers and consumers as the economy and hospitality industry continue to recover from the pandemic, the council said in a recent statement after Tai was confirmed by the Senate.

US whiskey makers have been caught up in the transatlantic trade dispute since mid-2018, when the EU imposed tariffs on US whiskey and other US products in response to former President Trump’s decision to reduce tariffs on European steel and aluminum.

Since then, US whiskey exports to the EU have fallen by 37%, costing whiskey distillers hundreds of millions in revenue between 2018 and 2020, the council said. US whiskey exports to the UK, the industry’s fourth largest market, have fallen 53% since 2018, he said.

Tariffs are a tax that whiskey producers can either absorb by reducing their profits or pass on to customers through higher prices and risk losing market share in highly competitive markets.

Amir Peay, owner of the James E. Pepper Distillery, based in Lexington, Ky., Said American whiskey has become collateral damage in trade disputes. It cost it around three-quarters of its European business, and the impending European tariff of 50% threatens to drain what remains.

This could potentially end our business in Europe, as we have known over the years, Peay said in a telephone interview on Thursday.

It has already reduced some whiskey shipments to Europe in order to guard against the potential doubling of the EU tariff. His brand of bourbon and rye, signature of his distillery, is James E. Pepper 1776.

Peay has spent years and a lot of money cultivating European markets, especially Germany, France and the UK. He planned to double his European activity before trade disputes broke out.

“The way things are going, everything we’ve invested so far looks like it can be destroyed,” he said.

The tariffs have also hurt the giants of the spirits industry.

We estimate that our company has borne about 15% of the entire tariff bill levied on the United States in response to the steel and aluminum tariffs, recently said Lawson Whiting, President and CEO of Brown. -Forman Corp. They have become a big problem for us and it is imperative that we resolve them as quickly as possible.

Brown-Forman’s flagship product is Jack Daniels Tennessee Whiskey, a global brand.

For Kentucky bourbon producers, tariffs reduced their exports by 35% in 2020, as shipments to the EU fell nearly 50%, the Kentucky Distillers Association said.

The EU was traditionally the world’s largest market for Kentucky distilleries, accounting for 56% of all exports in 2017. It now accounts for around 40%, according to the association.

Our flagship bourbon industry has suffered significant damage for more than two years due to a trade war unrelated to whiskey, said KDA President Eric Gregory. And it will be much worse if we cannot defuse this dispute.

Kentucky distilleries make 95% of the world’s bourbon supply, the association estimates.

The thaw in disputes between the US and the EU and the UK was part of an effort to resolve a long-standing dispute between Airbus and Boeing. The tariff suspensions applied to duties that had been imposed on certain spirits producers on both sides of the Atlantic. But the advances have left a lot of things unfinished, including disputes that have led to the retaliatory tariffs that still hit American whiskey.

The suspended tariffs mean that some European spirits producers can ship their products to the United States duty-free, while American whiskey makers are still subject to tariffs, Whiting said.

We just want a level playing field for American whiskey, he said.

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