Tariffs stir unrest among American whiskey producers

BRUCE SCHREINER
Kentucky.- Much of the rye whiskey aging in hundreds of barrels at Catoctin Creek Distillery in Virginia could end up being consumed in Europe, a market the 9-year-old distilling company has cultivated at considerable cost. But an escalating trade dispute has the distillery’s co-founder and general manager, Scott Harris, worried those European sales could evaporate as tariffs drive up the price of his whiskey in markets where consumers have plenty of spirits to choose from.

“If Europe dried up, then we’re sitting on inventory we didn’t need,” Harris said by phone. “And that’s a really tough position to be in.” What American whiskey makers have dreaded is becoming reality. The European Union will start taxing a range of U.S. imports on Friday, including Harley-Davidson bikes, cranberries, peanut butter, playing cards and whiskey.

The union is responding to President Donald Trump’s decision to slap tariffs on European steel and aluminum. American distilleries large and small have watched warily as the threat of tariffs from Europe ratcheted up in recent weeks. And while larger, corporate-owned facilities tend to do the most business overseas, small and mid-sized companies could be especially vulnerable, since they lack the ability to stockpile reserves and take other protective steps.

Foreign markets have become lucrative for American whiskey makers. Export revenues for bourbon, Tennessee whiskey and rye whiskey products topped $1 billion in 2017, continuing a strong trend in recent years, according to the Distilled Spirits Council. Four of the five top growth mar kets by dollar value for American distilled spirits were in Europe — the United Kingdom, Germany, France and Spain.

Total U.S. spirits exported to the EU in 2017 were valued at $789 million, the distilled spirits trade group said. American whiskey has also been targeted by other countries embroiled in trade tensions with the U.S., including China, Canada and Mexico. In Germany, some whiskey retailers predict consumers will probably refrain from buying expensive American whiskey and go for cheaper alternatives once the tax is added to U.S. spirits. Volker Rickmann, from the Tabac & Whisky Center in Berlin, predicted his customers would buy Canadian and Irish whiskeys once U.S. spirits prices rise.

At the Staendige Vertretung bar, supervisor Rowena Strehlow showed a near-empty bottle of imported Wild Turkey Bourbon. “Germans only order expensive drinks for special occasions,” she said.

“Once the prices rise, they will simply drink something else.” In a recent letter to U.S. Commerce Secretary Wilbur Ross, the Distilled Spirits Council said: “The imposition of tariffs on these products by our major trading partners threatens to seriously impede the export progress that has benefited our sector and created jobs across the country.” European markets — led by Germany, Italy and the UK — represent about 25 percent of Catoctin Creek’s overall business, Harris said.