The escalating trade war between the U.S. and its allies is affecting U.S. brewers and distillers.
Some distilleries have pulled out of foreign markets due to the uncertainty surrounding tariffs, while beer makers are facing an impending tax on aluminum, meaning the cost of cans could surge.
The Trump administration has been trying to reshape global trade in favor of U.S. manufacturing. President Donald Trump on Thursday threatened to impose a 200% tariff on alcohol products from France and other European countries. The threat came shortly after the European Union announced it would proceed with a planned 50% tariff on American whiskey. The European Commission’s plan to impose counter-tariffs on 26 billion euros’ ($28 billion) worth of U.S. goods exports was in response to Trump’s 25% tariffs on steel and aluminum imports.
Distilled Spirits Council CEO Chris Swonger wants the president to secure a spirits agreement with the EU, arguing that the U.S. spirits sector supports more than $200 billion in economic activity. It also provides 1.7 million jobs across production, distribution, hospitality and retail, and purchases about 2.8 billion pounds of grains from American farmers, according to Swonger.
“We urge President Trump to secure a spirits agreement with the EU to get us back to zero-for-zero tariffs, which will create U.S. jobs and increase manufacturing and exports for the American hospitality sector,” he said in a statement last week. “We want toasts not tariffs.”
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Distillers like Jeff Quint, owner of Cedar Ridge Distillery in Iowa, find themselves in the middle. While Quint told FOX Business he understands what the administration is trying to do, he said, “It’s pretty hard to argue that bourbon isn’t going to be part of the collateral damage from this process.”
“Collateral damage would be a good descriptor of what bourbon looks to be in this process,” he said, adding that the industry would prefer “no tariffs in either direction, which is mostly what we’ve had for decades, and that’s worked out quite well.”
Quint said the imposition of tariffs forces distillers to pull out of foreign markets because of the lackluster demand. This will subsequently cause an oversupply in the U.S., creating more competition between distillers domestically.
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“If you have 300 distilleries making bourbon, and we continue to make the same amount of bourbon while global demand is going down via tariffs being slapped on bourbon, then you’re going to end up with a glut of bourbon here domestically,” Quint said. “That could help the consumer because it could drive pricing down on bourbon, but it’s not going to help the 300 distilleries that make the bourbon.”
Harry Schuhmacher, publisher of Beer Business Daily, told FOX Business that in the bourbon and wine business there is “either a massive glut of too much liquid or we can’t get enough of anything.”
“It’s always feast or famine,” Schuhmacher said. “Unfortunately, just as these tariffs are coming on the bourbon industry, even before this was starting to experience a glut, not only because demand has softened, but because they made a bunch of it five years ago.”
Schuhmacher also argued that another issue is that, unlike beer, unopened bourbon is not perishable and can last on shelves for 50 years or more.
“That’s why we in the beer industry don’t have those huge swings of glut and famine. Because if we make too much, the beer goes bad, and it gets thrown out. So when we make too much bourbon, it sits on grandpa’s shelf,” he said.
However, Schuhmacher pointed out that the beer industry is facing its own unique challenges due to tariffs.
The more serious issue, Schuhmacher said, is the 25% tariff on all steel and aluminum imports, which took effect this week.
“We get almost all of our canned aluminum from outside the country,” he said. “I know that the administration doesn’t want inflation and that is what will make beer prices go up immediately. A huge input cost for beer is aluminum.”
Schuhmacher added that 75% of beer is sold in cans, and nearly all new products are packaged this way. He said this has a greater impact on beer companies than it does on soft drink companies.
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