Trump’s Tariffs Killing the Buzz

With these new tariffs that President Trump has rolled out as part of his “America First” economic policy, he hopes to reduce the United States trade deficit. The tariffs began with solar panels and washing machines in January 2018 but have now reached far greater by setting a tariff in trades with China in July 2018. This tariff and others have drastically affected overseas relationships with not just China, but with the European Union, Canada, and Mexico. One thing that President Trump did not consider, and not enough people are talking is the effect these tariffs have had on the America whiskey industry.

Presidential Tariffs

While these tariffs do not explicitly state that whiskey falls under his cuts, whiskey exports depend on steel and aluminum. On March 1st, 2018, President Trump imposed a 25% tariff on steel and a 10% tariff on aluminum imports, but he excluded countries like Canada, the EU, and Mexico but by March 25th, those exclusions became included. On May 17th, 2019, the United States reached a deal to lift the steel and aluminum tariffs on Mexico and Canada.

In the first six months of 2018, U.S. global whiskey exports recorded a 28% increase. Once the levies from Canada, Mexico, China, and the EU took effect it, U.S. states that exported whiskey fell by 8% from July to November. Over the full-year of 2018, whiskey exports rose 5% to $1.18 billion, which is a significant drop from the 16% rise in 2017. The E.U. exports of whiskey fell 13.4% in the second half of 2018, after rising 33% during the first six months. “With the full year data in hand, it is clear that the retaliatory tariffs are having a significant and growing impact on American Whiskey exports, which had been a bright spot for U.S. agriculture exports. The damage to American whiskey exports is now accelerating, and this is collateral damage from ongoing global trade disputes,” Distilled Spirits Council Chief Executive Officer Chris Swonger said.

Whiskey Tariffs

Brown-Forman, one of the largest American-owned companies in the spirits and wine business and owners of brands like Jack Daniels, have claimed that these tariffs could negatively impact Jack Daniels in the estimation of $125 million. Once the tariffs took effect, Tennessee whiskey exports fell more than 30% in the fourth quarter. Overall, whiskey exports have dropped from $197 million to $135 million after having steadily increased over the past few years. Tennessee’s most significant impact came from losses in Canada and Latin America, with Canada exports dropping by over $200 million. With whiskeys aged for years at a time, distilleries are currently preparing their products for as soon as 2025, but those projections are based upon today’s demands of the markets overseas. Distilleries need to consider how to proceed with the future product since they are unable to predict demand properly.

Since President Trump’s inauguration, the U.S. trade deficit has grown close to $120 billion. Most of the experts say that this trend is only going to worse before it gets better. Since the tariffs were introduced, some countries have introduced retaliatory tariffs. On June 5th, 2018, Mexico had retaliatory tariffs, on July 1st Canada followed, and then China on July 6th. Now that President Trump and China are going back and forth trying to one-up the other, it seems that in the end, it will be the American people who truly suffer the most. The best thing we can do right now grabs a glass, pour a drink, and hope for the best because who knows how long we will still be able to.

 

Charles Keyes