The establishment of duties on alcohol trade between the US and EU in 2018 led to a sharp drop in the export of American spirits. A further increase in the EU import duty in 2021 on US whiskey accelerated the decline, which turned out to be the European trade war. Over the years, the US’ response to tariffs on distilled spirits and wines from the EU also had a harsh impact on the industry.
EU Import Duties Increase Steeply
As reported by the market research platform IndexBox in October 2021, exports of American spirits dropped from $2.1B in 2018 to $1.9B in 2020.
In June 2018, the EU set a 25% import duty on American whiskey, which was extended in 2020 to include rum, brandy, vodka, and vermouth from the US.
Although the US and the EU agreed to a 4-month reciprocal suspension of trade tariffs on alcohol and spirits in March 2021, the import duty to the EU finally increased twofold to 50% this June.
If the duty is not active, the total volume of shipments of American alcohol abroad will likely continue declining. In monetary terms, the share of whiskey’s shipments accounts for about 44% of entire spirits exports from the US, and Europe is one of the main export markets.
Aftermaths of the Tariff War on Alcohols
Over the years, the US government responded to the EU tariffs with an equal tax on distilled spirits from Germany, Italy, Ireland, Spain, and the UK. This trade retaliation led to the beginning escalation, causing a fall in exports and imports’ side (-6% YoY in 2020).
In addition, as of October 2019, the US government applied a hefty tariff of 25% to wines coming from France, Germany, Spain, and the UK. Its impact was immediately evident, with a sharp 15% decrease in wine imports in 2020.
The European trade war severely hit US alcoholic beverages, harming both firms and consumers. On the one hand, duty barriers penalized domestic producers who found it harder to sell their distilled spirits abroad—and damaged consumers who likely have fewer options for their wines.
An improvement in the situation can only be foreseen in the context of a “cease-fire” within the trade war ignited in 2018 with the Airbus-Boeing dispute and the introduction of tariffs on aluminum and steel, which have not been yet revoked.
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