When Oregon’s single malt powerhouse Westward Whiskey decided to launch in Europe several years ago, it set a competitive price for its whiskey. After all, you’re not entering a new market by costing more than the next bottle on the shelf.
But in mid-2018, the European Union imposed tariffs of 25% on American whiskey, in retaliation for President Trump’s tariffs on European steel and aluminum. Westward’s bottles hadn’t even reached the shelves before they lost a large sum of money.
âWe were immediately less profitable,â said Thomas Mooney, CEO of Westward.
Now, Westward and other Oregon artisanal spirits producers welcome the end of the EU tax on US whiskey, which will be lifted on January 1, 2022. UK tariffs on US whiskey remain in place for the moment.
âThe end of tariffs on whiskey in the EU is a very positive development,â Mooney said. âThe timing is spectacular.
Oregon has more artisanal spirits producers than most states – around 77 – but relatively few of them export to Europe. Yet even some producers who have never sold in the EU are rejoicing, hoping that the end of tariffs will also bring financial relief to the home.
Whiskey makers on a barrel
Think back to 2018. There was no coronavirus pandemic. Economic news has been dominated by another source of volatility: the escalation of President Trump’s trade wars.
In June 2018, the Trump administration began imposing tariffs of 25% and 10% on steel and aluminum imported from the EU, Canada and Mexico. Europe responded with taxes not only on American steel and aluminum, but also on jeans, Harley Davidson motorcycles and whiskey.
This put Westward in a bind. It was the new kid on the block in Europe, which already produced most of the world’s luxury single malt whiskey.
Producers like Westward had a choice: either to absorb the tariffs, which reduced profits, or to pass on the higher costs. Westward decided to eat up the fares. The company was trying to build a brand, not alienate itself from potential customers.
âWe can’t afford to make ourselves 25% more expensive just because our operating costs are 25% higher,â Mooney said.
Since then, Mooney said, Westward has barely hit the break-even point of its European sales.
Other whiskey producers have seen their European orders dry up.
âThe tap has closed. And the tap was doomed, âsaid Jake Holshue, production manager for Rogue Ales & Spirits in Newport.
Exports of US whiskey to the EU fell 37% after tariffs were imposed, the US Distilled Spirits Council said this fall. The closure of bars and restaurants during the pandemic worsened the effects of the trade war.
Rebuilding whiskey exports takes time
The Biden administration and the EU reached an agreement this fall. In January, more European steel and aluminum products will be able to enter the US market duty-free. And the EU will drop retaliatory tariffs on billions of dollars of iconic American goods, including blue jeans and bourbon.
It’s good news.
But Holshue, who sits on the board of the American Craft Spirits Association, said it will take time for producers to rebuild their relationships with European customers.
“It’s not like flipping a switch, is it?” We are not just going to start flooding the European market with our spirits, âhe said.
In addition, international shipping is in crisis mode due to the pandemic, disrupting global supply chains.
Brad Irwin, owner of Oregon Spirit Distillers in Bend, said he’s not quite ready to export internationally. Yet, he said, “we are very grateful that these tariffs are gone.”
That’s because Irwin’s biggest seller is a four-year-old bourbon. And bourbon – including the famous Kentucky bourbon – was one of the iconic American products that Europe was targeting.
Irwin saw tariffs forcing more American-made bourbon to stay in America, where it could sell for less.
âIt has greatly affected our sales in the United States, despite the fact that we are not even in Europe,â said Irwin. âBut we’ve just seen more and more brands on the market, taking up that precious space on the shelves. “
Irwin said he had to ignore some previously planned price increases to stay competitive. With the disappearance of tariffs, he hopes to achieve the planned increase soon.
Berlin bar has bigger worries
For American whiskey makers, the end of European tariffs is timely. They may cross off an item from a list of expenses that includes soaring inflation, rising shipping costs, salary increases, and increasing glass prices.
But for some European customers, tariffs may not be a priority, even if they have footed the bill themselves.
Sebastian Degens, co-owner of Stone Barn Brandyworks in Portland, has a small business exporting to Europe.
“It is limited, currently, to a whiskey bar in Berlin,” he said.
Degens is saving whiskey for his next delivery to the bar, along with grappa and a green walnut liqueur. But he’s not sending them yet.
In early December, the bar owner was waiting to see if it would be closed again due to the increase in COVID-19 cases in Germany. Degens said the bar had just reopened, having been closed for months in 2021.
âJust getting your business to survive through it all was the biggest concern,â Degens said.