Tariffs cause US spirits exports to drop 27% to EU
US spirits exports fell 14.3% to US$1.5 billion in 2019 with exports to the EU dropping by 27% following the retaliatory tariff on American whiskey.
US president Donald Trump locked the US in numerous trade wars last year as a result of implementing 25% and 10% import tariffs on steel and aluminium respectively, effective from 1 June 2018.
Since then, exports to the European Union (EU), Canada, Mexico, Turkey and China worth an estimated US$732 million have faced retaliatory tariffs – though Canada and Mexico have since come to an agreement with the US to end retaliatory tariffs.
New figures from trade body the Distilled Spirits Council of the US (Discus) showed that global exports of American whiskey fell 16% to US$996 million in 2019. American whiskey exports to the EU fell 27% to US$514m “after several years of double-digit growth” in the market.
The data also shows major export declines for American whiskey in individual EU countries such as the UK (-32.7%), France (-19.9%), Germany (-18.2%) and Spain (-43.8%). Seven of the top 10 markets are in the EU, which faces a 25% tariff.
Total US spirits exports to the top 10 markets were down 16.6% to US$987m. Five of the top 10 markets are EU members, including UK (-41.5%), France (-18.9%), Germany (-30.4%), Spain (-41.3%) and Latvia (+19.5%).
“While it was another strong year for US spirits sales, the tariffs imposed by the European Union are causing a significant slump in American whiskey exports,” said Discus president and CEO Chris Swonger.
“The data is clear. These tariffs are chipping away at American whiskey’s brand equity in our top export markets. These great American whiskey products that have been the toast of the global cocktail scene are struggling under the weight of the EU tariffs.
“If this trade dispute is not resolved soon, we will more than likely be reporting a similar drag on the US spirits sector, jeopardising American jobs and our record of solid growth in the US market.”
Discus chief of public policy Christine LoCascio said there has been “important progress on the trade front”, citing the recent passing of US-Mexico-Canada Agreement (USMCA), which preserves tariff-free trade for spirits. She also noted the US-China Phase One deal and “negotiations with Japan are also positive developments”.
“We are hopeful that the recent trade agreements will create new momentum for negotiations with the EU that will result in the immediate removal of retaliatory tariffs on American spirits exports and US tariffs on certain EU spirits,” said LoCascio.
On 2 October, the US government revealed its intentions to impose a 25% import tariff on EU goods, including single malt Scotch whisky, single malt whiskey from Northern Ireland, liqueurs and cordials from Germany, Italy, Spain, Ireland and the UK and wine. The dispute is over civil aircraft subsidies.
The EU has threatened to impose additional retaliatory tariffs on rum, brandy and vodka exports from the US.
LoCasio expects the World Trade Organization to issue a retaliation from the EU on the US this week. During the Discus briefing yesterday (12 February), LoCasio said: “We could see a potential escalation. We hope it gets resolved before that.”
Market share gains
In 2019, spirits gained market share versus beer and wine with sales rising half of a point to 37.8% of the total alcohol sector. Discus said this represents the 10th straight year of market share gains for spirits, where each point of market share is worth US$770m in supplier sales revenue.
In the US, supplier sales were up 5.3% in 2019, rising US$1.5bn to a record total of US$29bn, while volumes rose 3.3% to 239m cases, up 7.6m cases from the previous year.
David Ozgo, Discus chief economist, said the “strongest revenue growth” from US spirits in 2019 “continued to come from high-end premium and super-premium products”.
Discus also said it was “very pleased” with the one-year extension to the Craft Beverage Modernization and Tax Reform Act and its top priority is to make the bill permanent. This will “provide craft distillers with the stability and certainty needed to continue to invest in their businesses, generate new jobs and support their local communities”.
Swonger, who is also president and CEO of Responsibility.org, said there was “significant progress” last year in the reduction of underage drinking and alcohol-impaired driving.
According to US government data cited by Discus, underage drinking and college binge drinking have fallen to historic lows, and alcohol-impaired driving fatalities are at its lowest level since 1982.