US and EU remove tariffs on rum and Cognac

8th March, 2021 by Nicola Carruthers

The US and EU have agreed to a four-month suspension of tariffs on products from both nations, including rum, vodka and Cognac.

Cognac glass

The 25% US tariff on Cognac, which came into force in January 2021, has been lifted for four months

In a statement on 5 March, European Commission president Ursula von der Leyen confirmed she had spoken to US president Joe Biden to agree a temporary suspension of the tariffs in relation to the Airbus-Boeing dispute.

The trade war between the European Union (EU) and the US is part of a 16-year dispute between aircraft manufacturers Airbus and Boeing. In 2019, the US government imposed tariffs on US$7.5 billion worth of EU goods, including single malt Scotch and single malt Irish whiskey, because of the ongoing disagreement.

In October 2020, the World Trade Organization (WTO) sanctioned the EU to impose tariffs on almost US$4bn worth of US products, including a 25% import tax on rum, brandy, vodka and vermouth from the US.

The 25% EU tariff on US rum, brandy and vodka has been suspended, as well as the 25% US tariff on liqueurs and cordials from Germany, Ireland, Italy and Spain, and certain Cognacs and other grape brandies from France and Germany, the latter of which was implemented in January 2021.

Von der Leyen said: “We are both committed to focus on resolving our aircraft disputes, based on the work our respective trade representatives. This is excellent news for businesses and industries on both sides of the Atlantic, and a very positive signal for our economic cooperation in the years to come.”

The move came just a day after the US agreed to temporarily remove tariffs on UK goods, including single malt Scotch whisky, for the same period of time.

Trade group the Distilled Spirits Council of the US (Discus) said the decision was a ‘promising breakthrough’ in the long-running spat, which ‘left much destruction to the spirits sector in its wake’.

Discus said the temporary removal of the tariffs comes at a key time for the US hospitality sector. The move will help support the recovery of the on-trade and distilleries across the country, which were forced to shut due to the pandemic.

‘Serious competitive disadvantage’ 

However, Discus said the EU and UK continue to impose a 25% tariff on American whiskey, which is due to double on 1 June this year. Discus called the tariff ‘unfair and not sustainable’.

Total American whiskey exports declined 29% from 2018 to 2020. US whiskey exports to the EU fell 37% over that period and dropped by 53% to the UK.

Discus said: “Until steps are taken to address the dispute over steel and aluminium tariffs, American whiskey – the United States’ largest spirits export category – will remain at a serious competitive disadvantage in our two most important export markets.

“We commend the Biden administration for moving quickly to reset relationships with our trade allies and urge for a speedy resolution that eliminates all of these debilitating tariffs on spirits for good.”

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