American Distillers Brace for Huge E.U. Tariff Hike

From the front door of his distillery on the outskirts of Cedar Rapids, Iowa, Jeff Quint knows he doesn't have to worry much about a supply chain for raw materials. All he has to do is take a look around.

Cedar Ridge Distillery's top product is its bourbon. Bourbon is made from corn. And there's no shortage of corn in Iowa, the top corn-growing state in the world's top corn-growing nation.

The other half of the equation is what keeps Quint awake at night. For reasons completely beyond his control, the distribution channels for American-made bourbon could soon be crushed by new tariffs of 50 percent that the European Union (E.U.) has threatened to implement on January 1.

"It's probably top of the mind for the average distiller right now," Quint tells Reason of the upcoming deadline for a tariff decision. "It was retaliatory and that's what they chose, so…all we can do is try to make it go away."

He's got some help in making that happen. In a letter to the White House last week, a bipartisan group of senators called on the Biden administration to seek an "expedited agreement" with the E.U. to avert the tariff increase on January 1 and to take those tariffs off the table as a long-term option for resolving a trade conflict that has nothing to do with whiskey in the first place.

"There are mutual benefits in finding a path forward, and our belief is that spirits and wines are a point where there can be consensus to limit the damage for all parties," the 17 senators wrote in the letter.

The E.U. imposed retaliatory tariffs on American whiskey (along with other quintessentially American products like blue jeans and motorcycles) in June 2018 after the Trump administration unilaterally slapped tariffs on all imported steel and aluminum. Trump's tariffs were sold as an anti-China measure, but covered imports from allies like the E.U. and South Korea as well. The E.U.'s retaliatory tariffs, meanwhile, occurred despite promises from Trump's top trade adviser that other countries would not respond with tariffs targeting American goods.

Due to those 25 percent tariffs, whiskey exports to Europe fell by about 20 percent between 2018 and 2021, according to the Distilled Spirits Council of the United States (DISCUS), which lobbies on behalf of American booze producers. That decline in foreign sales cost American distilleries over $100 million.

Those tariffs were temporarily suspended in 2022, and exports to Europe rebounded almost immediately, according to DISCUS' data. Over the past two years, exports to the E.U. increased by 29 percent and exceeded pre-tariff levels.

Now that recent growth is at risk. If no deal is reached by January 1, the E.U. could decide to reimpose the tariffs at 50 percent—double the previous levels—when the temporary reprieve expires.

"A return of these debilitating tariffs would be a severe blow to U.S. distillers and bring this positive momentum to a screeching halt," Chris Swonger, president and CEO of DISCUS, said in a statement.

A meeting in October between President Joe Biden and European Commission President Ursula von der Leyen failed to resolve the impasse. Now, the clock is ticking.

Whatever happens, Quint and his 65 employees at Cedar Ridge Distillery are helpless to do much about it—and the same is true for the thousands of other employees, entrepreneurs, and investors at work in the American whiskey industry. That's what trade wars do: give government officials greater control over the success or failure of individual businesses, even those that are far removed from whatever geopolitical spat caused the conflict in the first place.

Trump's been out of office for nearly three years, but the consequences of his half-baked trade wars are still spiraling out of control—in no small part because of Biden's unwillingness to end them. Another escalation in that conflict now looms over American distillers.

Quint tells Reason that he remains "cautiously optimistic" that an agreement will be reached before the end of the year.

"It's such a logical thing to to try to avoid the reinstatement of the tariffs," he says. "But, that said, it's approaching the middle of December and we've got two or three weeks for this to happen."