The Impact of Tariffs on the American Whiskey Industry
The American spirits industry is facing renewed challenges as tensions over trade continue to escalate. Just when it seemed that the sector was recovering from previous tariff battles with Canada and Mexico, a new wave of tariffs from the European Union (EU) threatens to inflict further damage, particularly on American whiskey producers.
Upcoming Tariffs and Industry Reactions
Starting April 1, the EU plans to introduce a steep 50% tariff on American whiskey. This development comes as President Donald Trump has pledged to counteract by placing a staggering 200% tariff on European wines and spirits. Such retaliatory measures risk destabilizing both American producers and consumers alike.
The Previous Tariff Fallout
The U.S. whiskey industry has endured similar tariffs in the past. Chris Swonger, president and CEO of the Distilled Spirits Council of the U.S., reported that exports to the EU, which represents the largest market for American whiskey, plummeted by 20% from 2018 to 2021 due to previous tariff disputes. Exports dropped from $552 million to $440 million. However, a brief suspension of these tariffs had seen American whiskey exports rebound by nearly 60%, growing from $439 million in 2021 to $699 million in 2024.
Challenges for Craft Distillers
The repercussions of these tariffs are not felt equally across the industry. Small craft distillers have been severely impacted. Margie A.S. Lehrman, CEO of the American Craft Spirits Association, noted that trade wars during Trump’s first term devastated exports for many small producers, leaving them with little chance to recover.
For craft brands like Sonoma Distilling Company, which entered European markets in 2012, tariffs have stifled growth and created uncertainty. Adam Spiegel, its founder and master distiller, remarked, “With stalled growth in key European markets, reduced orders, and uncertainty, many small distilleries like ours have been forced to absorb part of the tariff costs.” This choice has often eroded slim profit margins while also reducing consumer demand.
Similarly, Thomas Mooney, founder of Westward Whiskey, acknowledged that absorbing tariff costs was a misstep. He said, “In hindsight, I think we made a mistake because the success of Westward depended more on our presence than on a specific retail price,” which hindered their marketing efforts in Europe.
The Long-term Damage of Tariffs
According to data from the American Craft Spirits Data Project, craft spirits exports peaked at approximately 598,000 nine-liter cases in 2017 but fell dramatically to 262,000 cases just a year later. Exports have remained stagnant, not exceeding 169,000 cases since that time. This stagnation highlights the difficulty craft brands face in regaining footholds in foreign markets post-tariff.
“Even when tariffs are lifted, the loss of market presence is permanent,” Spiegel added. “Tariffs create an environment of uncertainty that disrupts planning and forecasting, making it nearly impossible for distillers to strategize for growth.”
Impact of Anti-American Sentiment
The economic ramifications of tariffs are compounded by a rise in anti-American sentiment in some international markets. Harris, co-founder and general manager of Catoctin Creek Distilling Company, reported that “we’ve had canceled orders as a result of this new level of virulent anti-Americanism.” Mooney emphasized that the reputational impact of tariffs can undo years of work to build market presence and consumer relationships.
In addition to direct sales losses, there are longer-term consequences for brand growth and international business relationships. “For many small distillers, tariffs represent a complete roadblock to entering or expanding in the EU market,” Spiegel concluded.
Conclusion
In conclusion, the American craft spirits industry finds itself at a critical juncture. The looming tariffs threaten not only immediate sales but also pose a grave risk of permanent damage to brand reputation and market presence. As these small, American-owned businesses navigate these turbulent waters, the potential for accelerated closures looms, bringing concerns regarding job loss and economic stability in the domestic spirits market.
