Since the dawn of the Trump administration, American alcohol makers have seemingly been stuck on a never-ending merry-go-round of escalating tariffs.
First, the administration’s aluminum tariffs hurt domestic brewers by substantially raising the cost of beer cans. Then Canada, Mexico, China, and the European Union all took turns imposing retaliatory tariffs on American whiskey in response to America’s aggressive tariff stance. Tariffs on Spanish olives even raised the cost of the humble martini.
Now the World Trade Organization authorized the United States to impose up to $7.5 billion in tariffs on a bevy of European exports, including Irish and Scotch whiskeys as well as wine from several European countries. While working through the WTO is a more legitimate way to impose tariffs than through unilateral action by the administration, the end result will still be more job losses and stymied growth in the craft alcohol sector.
Existing tariffs have already inflicted severe damage on America’s alcohol industry. According to the Beer Institute, the administration’s aluminum tariffs imposed $350 million in annual costson brewers, in addition to threatening up to 20,000 jobs. The tariffs imposed by foreign countries in retaliation to those tariffs significantly reduced American exports, thus further slowing down growth.
Alcohol makers (and drinkers) were brought partial relief by the Trump administration’s agreement earlier this year to lift tariffs on Canadian and Mexican aluminum and steel, and those countries’ resulting decision to end their retaliatory tariffs on American whiskey.
Yet now, with the WTO’s blessing of the European whiskey and wine tariffs, the alcohol marketplace is once again bracing for more pain.
While all tariffs are bad, some are more legitimate than others. The newly announced tariffs, for example, were imposed after a lengthy legal battle at the WTO between the United States and the EU over the latter’s illegal subsidies to Airbus. This comes in contrast to the aluminum tariffs, which the Trump administration levied without going through the WTO.
Although these latest tariffs bear the WTO’s seal of approval, the result will be more of the same. The Distilled Spirits Council of the United States has estimated that the new tariffs on alcohol will affect up to $3.4 billion in imports and may kill 13,000 American jobs. If anything, these estimates are under-inclusive, since they do not encompass the further retaliatory tariffs the EU is likely to impose on American manufacturers.
In the coming months, the WTO is expected to side with the EU in a dispute over the United States’ subsidies to Boeing. American exporters can expect retaliation from Brussels.
And round and round the merry-go-round goes. When it stops, nobody knows.
Beyond the basic economic calculations of these discrete tariffs, the larger issue is that the Trump administration’s desire to aggressively wield its tariff authority has generated a cloud of uncertainty for American alcohol markets, which threatens the job security of American alcohol manufacturers. According to the Bureau of Labor Statistics, breweries, wineries, and distilleries have produced some of the most manufacturing jobs of any industry in the United States in recent years. Given the administration’s emphasis on the importance of blue-collar jobs, it makes little sense to embroil the alcohol sector in perpetual and unpredictable tariff machinations that make it nearly impossible for companies to invest and plan for the future.
As we’ve argued before, the American economy is a dynamo, but we still benefit heavily from allowing our producers to expand their horizons beyond our shores. Over 80% of the world’s purchasing power resides outside the United States. Allowing goods to flow freely in and out of the country and reducing uncertainty will help our innovative and entrepreneurial alcohol sector grow even more in the years ahead.
Despite this promise, our alcohol producers are stuck on the administration’s tariff merry-go-round with no end in sight. It’s time to stop this ride to nowhere.
Image credit: Into The World