February 28, 2024

Jack Daniel’s Tennessee Whiskey

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U.S. whiskey distillers are breathing a sigh of relief as they will avoid a looming 50% tax on shipments to Europe.

The European Union said Tuesday it would extend the suspension of tariffs on U.S. whiskey until March 31, 2025. The 50% levy, which came in the context of a broader steel and aluminum dispute between the U.S. and the European bloc, was set to take effect in the new year.

“For the past two years the United State and European Union have been engaged in critically important negotiations,” said U.S. Trade Representative Katherine Tai, who oversaw the deal. “Our goal is to forge a forward-looking arrangement that will allow us to join forces economically to incentivize fair and clean production and trade in the steel and aluminum sectors.”

American whiskey makers found themselves in the middle of a trade dispute that started in 2018 after former President Donald Trump imposed tariffs on steel and aluminum. The EU responded with taxes on a variety of select U.S. products, as they aimed to apply pressure on politicians in Republican and swing states.

The EU initially set the whiskey tariff at 25%. American whiskey exports to the EU then plunged 20% from 2018 to 2021, falling from $552 million to $440, according to analysis by industry trade association Distilled Spirits Council of the U.S.

The measure was suspended in October 2022 as part of a mutual agreement to put the U.S. metals levies and EU tariffs on hold until Jan. 1 next year. They would have doubled to 50% at that time.

American whiskey exports to the EU increased by 29% in 2022 compared to 2021, reaching pre-trade dispute levels of $566 million that year.

“I am glad the EU has announced that it is taking steps to join us in extending the time for these negotiations and will follow our recommendation by continuing to suspend its tariffs on U.S. products,” Tai said.

In order to fulfill the agreement, the U.S. still needs to extend a suspension on steel and aluminum taxes to the E.U.

DISCUS also urged Biden to negotiate an end to tariff disputes.

“Until the threat of these tariffs returning is fully removed,” DISCUS President and CEO Chris Swonger said. “The uncertainty will continue to restrict American Whiskey export growth in our most important international market.”

‘Whiskey River’ runs dry

The deal is good news for American whiskey makers at a time when the spirit is losing market share.

Whiskey popularity is falling among American consumers. In 2022, agave-based spirits tequila and mezcal overtook American whiskey to become the second-fastest growing spirits category by revenue and volume within the U.S., according to analysis by DISCUS.

Brown-Forman — maker of Jack Daniels and Woodford Reserve — reported weak whiskey sales for the first half of its current fiscal year.

Whiskey net sales at the company fell 2% year over year, while net sales for the company’s tequila portfolio grew 2%.

“I do think American whiskey and tequila are still the two strongest categories in the U.S. spirits business,” said Brown-Forman CEO Lawson Whiting on the company’s latest earnings call. “Tequila is coming down off of sky-high numbers where American whiskey was steady. High, but not as high as tequila.”