EU and U.S. Reach Agreement to Continue Suspension of Tariffs on 50% of European Whiskey Exports

tendata blogTrade Trends News

ten data blog21-12-2023

· The United States and the European Union have reached an agreement to extend the suspension of EU tariffs on American whiskey.

· The -50% levy will take effect early next year and the suspension will last until March 31, 2025.

· U.S. whiskey distillers were concerned that the tariffs could hamper their business in key markets.

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U.S. whiskey distillers are breathing a sigh of relief because they will avoid a 50 percent tariff on European exports.

The European Union said Tuesday that it was extending the suspension of tariffs on U.S. whiskey until March 31, 2025. The 50 percent tariffs come amid a wider steel and aluminum dispute between the U.S. and the EU. The effect in the new year.

"The U.S. and the EU have been engaged in crucial negotiations over the past two years," said U.S. Trade Representative Catherine Day, who is in charge of the agreement. "Our goal is to establish a forward-looking arrangement that will allow us to join forces economically and incentivize fair and clean production and trade in the steel and aluminum sectors."

U.S. whiskey makers have found themselves embroiled in a trade dispute that began in 2018 after President Donald Trump imposed tariffs on steel and aluminum. The EU responded by imposing duties on a wide range of specific U.S. products, aiming to put pressure on Republicans and politicians in swing states.

The EU initially set a 25 percent tariff on whiskey. An analysis by the Distilled Spirits Council, a U.S. industry trade association, showed that U.S. whiskey exports to the EU fell 20 percent from 2018 to 2021, from $552 million to $440 million.

The measure was suspended in October 2022 as part of a deal between the two sides that suspends U.S. metal taxes and EU tariffs until Jan. 1 of next year. At that point they will double to 50 percent.

U.S. whiskey exports to the EU grew 29 percent in 2022 compared to 2021, reaching a pre-trade dispute level of $566 million that year.

"I am pleased that the EU has announced that it is taking steps to extend these negotiations with us and will follow our recommendation to continue suspending tariffs on U.S. products," Day said.

In order to honor the agreement, the U.S. still needs to Extend the suspension of steel and aluminum duties to the EU.

DISCUS also urged President Joe Biden to negotiate an end to the tariff dispute.

"Until the threat of the return of these tariffs is completely removed," said DISCUS President and CEO Chris Swonger. "Uncertainty will continue to limit the growth of U.S. whiskey exports to our most important international market."

"Whiskey River" Dries Up

The deal is good news for American whiskey makers at a time when the country is losing market share.

Whiskey's popularity among U.S. consumers is declining . By 2022, agave-based spirits tequila and mezcal will overtake American whiskey as the second-fastest-growing spirits category in the U.S. in terms of revenue and volume, according to a DISCUS analysis.

The maker of Jack Daniels and Woodford Reserve reported weak whiskey sales in the first half of the fiscal year.

The company's net sales of whiskey were down 2% year-over-year, while net sales of the company's tequila portfolio were up 2%.

"I do think American whiskey and tequila remain two of the strongest categories in the U.S. spirits industry," Brown-Forman CEO Lawson Whiting said during the company's latest earnings call. "Tequila sales are declining from sky-high prices, while American whiskey is holding steady. It's high, but not as high as tequila. "

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