American whiskey brands are feeling the burn of the Trump administration’s trade war, according to new data released by the Distilled Spirits Council.
After President Trump initiated tariffs on foreign steel and aluminum last year, Canada, Mexico, China, and the European Union (E.U.) retaliated with tariffs on various American-made products, including whiskey. The brown spirit was hit with duties of up to 25 percent, quickly causing a sizeable hit to exports.
In 2018, American whiskey exports rose 28 percent during the first half of the year, compared with the same period in 2017. Between July and November, however, and after Trump’s tariffs came into effect, sales dropped more than 8 percent compared to the previous year.
The trade war comes at a time when demand for American whiskey is booming worldwide. Bourbon sales to the E.U. alone totaled $154 million in 2017, up from $128 million in 2016. Unsurprisingly, tariffs have hit independent craft producers hardest.
“Many of our craft spirits producers, knowing how difficult it is to get products on shelves and into restaurants here in the United States had, as part of their business plans, anywhere from 25 to 30 percent of their overall revenues coming directly from exports,” Margie A.S. Lehrman, chief executive of the American Craft Spirits Association, told Bloomberg Tax.
“Many of those same craft distillers who had that as a business model last year had to drop that and in fact realized between only 10 to 15 percent because of the tariffs that were imposed on whiskey,” Lehrman said.
Big spirits producers, on the other hand, were able to minimize the sales hit by exporting large quantities of whiskey just before tariffs came into effect.
Despite the impact of export tariffs, the American spirits industry enjoyed an overall bumper year, thanks in large part to the strength of the American economy. Revenue rose more than five percent to a record $27.5 billion in 2018, with premium liquor sales driving growth.