Oregon whiskey makers eagerly await lifting of European tariffs
A trade agreement between the U.S. and the EU taking effect Jan. 1 should help some Oregon distillers.
When Oregon’s single malt powerhouse, Westward Whiskey, decided several years ago to launch in Europe, it priced its whiskey competitively. After all, you don’t get a foothold in a new market by costing more than the next bottle on the shelf.
But in mid-2018, the European Union slapped 25% tariffs on American whiskey, in retaliation for President Trump’s tariffs on European steel and aluminum. Westward’s bottles hadn’t even hit the shelves before they lost a chunk of cash.
“We were immediately less profitable,” said Westward CEO Thomas Mooney.
Now Westward and other Oregon craft spirits producers are hailing the end of Europe’s tax on American whiskey, which will lift on Jan. 1, 2022. The United Kingdom’s tariffs on U.S. whiskey remain in place for now.
“The end of tariffs on whiskey in the EU is a huge positive development,” Mooney said. “The timing is spectacular.”
Oregon has more craft spirits producers than most states — about 77 — but relatively few of them export to Europe. Still, even some producers who never sold in the EU are celebrating, hoping the end of tariffs provides financial relief at home, as well.
Whiskey makers over a barrel
Think back to 2018. There was no coronavirus pandemic. Business news was dominated by a different source of volatility — President Trump’s escalating trade wars.
In June 2018, the Trump administration began applying 25% and 10% tariffs on steel and aluminum imported from the EU, Canada, and Mexico. Europe responded with taxes not just on American steel and aluminum, but also jeans, Harley Davidson motorcycles and whiskey.
That 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 such as Westward had a choice: either absorb the tariffs — reducing profits — or pass along the higher costs. Westward decided to eat the tariffs. The company was trying to build a brand, not alienate potential customers.
“We can’t afford to make ourselves 25% more expensive just because our cost of doing business is 25% higher,” Mooney said.
Since then, Mooney said, Westward has barely broken even on its European sales.
Other whiskey producers saw European orders dry up.
“The faucet turned off. And the faucet was condemned,” said Jake Holshue, production manager for Rogue Ales & Spirits in Newport.
American whiskey exports to the EU plunged 37% after the imposition of tariffs, the Distilled Spirits Council of the U.S. said this fall. The closure of bars and restaurants in the pandemic compounded the effects of the trade war.
Rebuilding whiskey exports takes time
The Biden administration and the EU reached an agreement this fall. Come January, more European steel and aluminum products can enter the U.S. market tariff-free. And the EU will drop retaliatory tariffs on billions of dollars of iconic American goods — including blue jeans and bourbon.
That’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 relationships with European customers.
“It’s not like flipping on a light switch, right? We’re not just going to start flooding the European market with our spirits,” he said.
Plus, international shipping is in crisis mode from the pandemic, roiling global supply chains.
Brad Irwin, owner of Oregon Spirit Distillers in Bend, said he isn’t quite ready to export internationally. Still, he said, “we are very thankful that those tariffs have gone away.”
That’s because Irwin’s biggest seller is a four-year bourbon. And bourbon — including big-name Kentucky bourbon — was one of the iconic American products Europe was targeting.
Irwin watched as the tariffs forced more American-made bourbon to stay in America, where it could sell for less.
“That greatly affected our sales in the United States, despite the fact that we aren’t even in Europe,” Irwin said. “But we just saw more and more brands on the market, taking up that valuable shelf space.”
Irwin said he had to skip some previously planned price increases to stay competitive. With tariffs gone, he’s hoping to make that planned markup soon.
One Berlin bar has bigger worries
For American whiskey makers, the end of European tariffs is well timed. They can cross one item off a list of expenses that includes surging inflation, rising shipping costs, wage increases and the increased price of glass.
But for some European clients, tariffs may not be top of mind — even if they’ve been footing the bill themselves.
Sebastian Degens, co-owner of Stone Barn Brandyworks in Portland, has a tiny export business to Europe.
“It is limited to, currently, one whiskey bar in Berlin,” he said.
Degens is putting aside whiskey for his next shipment to the bar, as well as grappa and a green walnut liqueur. But he’s not sending them yet.
In early December, the bar owner was waiting to see if he’d be shut down again because of rising COVID-19 cases in Germany. Degens said the bar had just reopened, after being closed for months in 2021.
“Just having his business survive through all of that was the greatest concern,” Degens said.
Copyright 2021 Oregon Public Broadcasting