Impact of Retaliatory Tariffs on American Whiskeys Accelerates

The Distilled Spirits Council today released a new report showing the negative impact of the retaliatory tariffs on American Whiskeys is accelerating, particularly to the European Union (EU), according to full year 2018 export data.

Last month, at its Annual Economic Briefing, the Council reported the imposition of retaliatory tariffs beginning in June 2018 caused American Whiskey exports to decline by 8.2 percent between July and November as compared to the same period in 2017.  But the available data was only through November, and the Council declined to project full year results due to the uncertainty in the marketplace resulting from the retaliatory tariffs.

Full Year Data Underscores Accelerated Tariff Damage 

Globally, for the first six months of the year American Whiskey exports grew 28 percent to a total of $595 million.  Following the imposition of the retaliatory tariffs, exports during the second half of the year declined 11 percent compared to 2017, for a total of $593 million. Typically, U.S. distilled spirits exports in the second half of the year are much higher than in the first half, underscoring the harm the tariffs have caused.

Overall, total American Whiskey exports still managed to eke out a small gain of 5.1 percent in 2018, to a record $1.18 billion—a significant deceleration from the annual growth rate of 16 percent recorded in 2017.

“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,” said Council President and CEO Chris Swonger. “The damage to American Whiskey exports is now accelerating, and this is collateral damage from ongoing global trade disputes.”

Significant Slow Down of American Whiskey Exports to Top Market EU

The EU, which accounted for nearly 60 percent of total American Whiskey exports in 2018, experienced sizzling first half growth of 33 percent but whiplashed into a 13.4 percent decline in the second half when the tariffs slammed on the brakes. That is a significant deceleration in American Whiskey exports to the EU from the 8.7 percent decrease the Council first reported in February resulting from the 25 percent import tariff. American Whiskey exports to the EU still reached a record $704 million, up from $667 million in 2017.

Snapshot of Tariff Impact on Total U.S. Spirits Exports

Total U.S. spirits exports reached a record $1.8 billion, a 9.5 percent increase from $1.64 billion in 2017, but the rate of growth significantly slowed from the 14.9 percent growth recorded between 2016 to 2017.  For the first half of 2018, total U.S. spirits exports grew 26.1 percent to a total of $881 million.  Following the imposition of the retaliatory tariffs, exports during the second half of the year declined 3 percent compared to 2017, for a total of $909 million.  In the fourth quarter alone, exports fell by 13.1% relative to the same period in 2017.

“These numbers are worrisome—even if some portion of the front-end growth is attributable to larger producers positioning product in foreign markets ahead of the tariffs,” Swonger said.

Small and Large Distillers Negatively Impacted

Small distillers have been particularly hit hard. They report orders lost and calls not returned as local distributors are reluctant to commit to new orders given the uncertainty. Many small distillers made substantial investments in international marketing and distribution in order to grow their overseas business, just as American Whiskey is becoming increasingly popular in markets around the world.

However, small distillers are not alone in feeling the impact of the tariffs.  Large distillers have reported declining sales in some key export markets as a result of the tariffs.

The Council, in collaboration with the U.S. Department of Agriculture, has conducted an export promotion program for U.S distilled spirits exports since 2006, hosting promotional events in 18 countries, primarily to educate spirits trade, distributors, mixologists and local journalists about American Whiskeys.

“With our member companies, we have worked for many years to promote American Whiskeys in key export markets.  As a result, their popularity has been skyrocketing.  We urge policy makers and our trading partners to rapidly address these retaliatory tariffs before more damage is done to what has been a great American trade success story,” Swonger concluded.