EU Tariffs Threaten to Decimate U.S. Spirits Industry Amidst Global Trade Turmoil

The impending re-implementation of European Union tariffs on U.S. spirits, particularly bourbon whiskey, is sending shockwaves through the liquor industry on both sides of the Atlantic. Trade associations are warning of potentially devastating consequences, exacerbating existing challenges already plaguing the sector. The European Commission’s announcement of tariffs on 26 billion euros ($28.31 billion) worth of U.S. goods, slated to take effect next month, is a direct response to U.S. tariffs on steel and aluminum, escalating a global trade war with far-reaching implications.

The revived tariffs will particularly impact bourbon whiskey, with the rate doubling to a staggering 50%, according to Ulrich Adam, director general of spiritsEurope, a prominent trade body representing leading U.S. and European spirits producers. Companies like Diageo, the producer of renowned brands, and Brown-Forman, the maker of Jack Daniels, are bracing for a significant blow. Moreover, the tariffs could extend to other spirits, potentially encompassing tequila and gin, further broadening the scope of the economic damage.

spiritsEurope has issued a stark warning about the debilitating effects on spirits companies across the Atlantic, highlighting that EU companies with spirits production operations in the United States could also face repercussions. The escalation of this global trade conflict occurs at a precarious time for the spirits industry, which is grappling with a significant slowdown in sales after experiencing a post-COVID boom. Furthermore, the sector is already contending with steep levies imposed by China on European brandy, severely impacting cognac sales.

Adam from spiritsEurope emphasized the current weakness of the market, citing high inflation, sluggish economies, and squeezed household incomes as contributing factors. The tariffs, he argued, represent another significant blow to an industry already struggling to navigate challenging economic conditions.

The industry fears that any attempts by producers to raise prices to offset the tariffs would likely result in a loss of market share, given the intensely competitive and price-sensitive nature of the spirits market. Consumers, already burdened by rising costs, may opt for cheaper alternatives, further eroding the profitability of U.S. spirits producers.

U.S. spirits companies have made substantial investments in Europe, creating numerous jobs and contributing significantly to the region’s economy. The imposition of tariffs puts these investments at risk, potentially leading to job losses and economic disruption.

The Distilled Spirits Council of the United States (DISCUS) has echoed these concerns, describing the impending tariffs on American whiskey, the industry’s largest export market, as "debilitating." DISCUS anticipates that the tariffs will further curtail growth and negatively impact distillers and farmers across the United States, who rely on the export market to sustain their businesses.

DISCUS pointed out that American whiskey exports to the EU had experienced a remarkable surge of 60% in the last three years, reaching $699 million in 2024. However, the previous tariffs on bourbon, imposed in 2018, had already caused a significant 20% decline in exports, demonstrating the tangible impact of trade barriers.

Lawson Whiting, CEO of Brown-Forman, acknowledged the challenging situation during the UBS Consumer and Retail Conference in New York. He stated that the company had been taking steps to prepare for the reimposition of tariffs, but emphasized the difficult position they were in. While acknowledging the preparation efforts, he also expressed hope that the two sides could resolve the dispute amicably before the tariffs come into effect. His comments underscore the uncertainty and apprehension gripping the industry as the deadline approaches.

The potential fallout from the EU tariffs extends beyond the immediate impact on spirits producers. The tariffs could disrupt supply chains, increase costs for consumers, and strain diplomatic relations between the United States and the European Union. The escalating trade war threatens to undermine the global trading system, creating uncertainty and hindering economic growth.

The situation is particularly disheartening for those in the industry who have invested heavily in building relationships and expanding their businesses in Europe. The tariffs represent a significant setback, potentially reversing years of progress and jeopardizing the livelihoods of countless individuals.

Industry leaders are urging policymakers to find a swift resolution to the trade dispute, emphasizing the need for dialogue and compromise. They are advocating for the removal of all tariffs on spirits, arguing that free and fair trade benefits both the United States and the European Union.

The reimposition of EU tariffs on U.S. spirits is a complex issue with far-reaching consequences. The outcome will depend on the willingness of both sides to engage in constructive negotiations and find a mutually acceptable solution. The stakes are high, and the future of the U.S. spirits industry in Europe hangs in the balance. Without a resolution, the industry faces a period of uncertainty and hardship, with potentially devastating consequences for producers, consumers, and the broader economy.