How a cocktail can help quell the COVID-19 economic panic

Ending tariffs on spirits would support U.S. jobs and allay market fears

A man waits for a takeout order at Kellys Irish Times on Capitol Hill on March 24. The coronavirus pandemic has hit bars hard, and a further escalation of the U.S.-EU tariff war would make the situation worse, Swonger writes.  (Tom Williams/CQ Roll Call file photo)
A man waits for a takeout order at Kellys Irish Times on Capitol Hill on March 24. The coronavirus pandemic has hit bars hard, and a further escalation of the U.S.-EU tariff war would make the situation worse, Swonger writes. (Tom Williams/CQ Roll Call file photo)
Posted July 20, 2020 at 8:00am

Across the country, efforts to control the spread of COVID-19 have prolonged cancellations of major sporting events, concerts, conferences, and business and leisure travel. This has spurred a devastating trickle-down effect throughout the entire hospitality industry, from hotel workers to employees at restaurants and bars.

One action our country can take to immediately boost the markets and the hospitality industry: Work with the European Union to end tariffs on European and American distilled spirits products.

For nearly two years, the spirits industry and its consumers have been caught up in a U.S.-EU trade dispute over aircraft subsidies and steel and aluminum tariffs. As part of this war, EU officials imposed a 25 percent tariff on U.S. whiskey in June 2018.

Then, in October 2019, the Office of the U.S. Trade Representative imposed 25 percent tariffs on single malt Scotch, as well as certain Irish whiskeys, cordials and liqueurs, and wines from the EU. Recently, USTR proposed raising these tariffs to 100 percent and expanding the list of subjected spirits to include all Scotch, Irish whiskey and cognac as well as European vodka and gin.

Tariffs make certain spirits and wine products prohibitively costly — or even unavailable — affecting the livelihoods of waitresses and bartenders, as well as tens of thousands of workers at liquor stores, importers and distributors. As fewer customers frequent bars and restaurants during the pandemic, these struggling businesses simply can’t afford higher prices. Ending these tariffs would help restore market faith and support U.S. jobs.

If USTR does decide to increase tariffs to 100 percent, the United States could lose up to 95,900 hospitality industry jobs and $10 billion in distilled spirits and wine retail sales. Consider that a $25 bottle of Irish whiskey or Scotch whisky could jump to almost $40. As a result, many waitresses and bartenders, who earn most of their money from tips, could see their incomes plummet.

The damage wouldn’t stop there. The EU would likely hit back by imposing new tariffs on more U.S. spirits products this fall. America’s craft spirits producers would bear the brunt of that retaliation.

America’s small distilleries have spent years building brand recognition and gaining a foothold in the European market, the largest market for U.S. spirits exports. Before the EU imposed its tariff on American whiskey, the United States exported more than $700 million worth of American whiskey to EU countries in 2018, accounting for nearly 60 percent of total U.S. whiskey exports. In fact, U.S. spirits exports reached a record high in 2018, driven by consumers who were captivated by American whiskey’s heritage, unique flavor profile and versatility in cocktails. 

Retaliatory tariffs are undoing all this progress. Thanks to the levy, American whiskey exports to the EU dropped nearly 33 percent, costing our country an estimated $300 million. Consider the story of Catoctin Creek Distillery in Virginia. In 2017, exports to the EU generated 11 percent of Catoctin’s revenue. That share fell to nearly zero after the EU imposed its 25 percent tariff. Higher tariffs could force Catoctin Creek and other small distillers to downsize or close their doors entirely.

The administration deserves credit for working to address longstanding trade barriers with important trading partners.

But prolonging the trade war on spirits will only prolong the suffering of hardworking Americans such as bartenders, servers, craft distillers and small-business owners. Eliminating the tariffs on distilled spirits would ease tensions and set trade talks on the right path, enabling officials to tackle longstanding trade challenges over steel, aluminum, aircraft parts, autos and agriculture.

USTR is currently accepting public input regarding the proposed tariffs on distilled spirits via its comment portal through July 26. It’s important for Americans to make their voices heard by urging the agency not to impose more tariffs and more harm on U.S. businesses. Participating in this comment process could make a real difference for businesses trying to stay afloat during mounting economic uncertainty.

Pulling back on tariffs on the spirits industry is the quickest, surest way to allay coronavirus-driven market fears and support hospitality jobs. Let’s hope America and Europe seize this opportunity.

Chris Swonger is the president and CEO of the Distilled Spirits Council of the United States, which represents producers and marketers of distilled spirits sold in the U.S.