The EU and the US have finally dropped the last of the trade barriers raised by a steel dispute.

By W. Blake Gray | Posted Monday, 01-Nov-2021

During his term as president, Donald Trump – a teetotaler – escalated a trade war with Europe that led to tariffs on alcohol on both sides of the Atlantic. On Saturday, the US and the European Union finally ended that war, to the delight of whiskey fans in Europe.

With US President Joe Biden in Italy for the Group of 20 Summit, the two sides agreed to end the fight over steel and aluminum imports that had led to the EU slapping American whiskeys with 25 percent tariffs. Those tariffs had been scheduled to escalate to 50 percent next month if the issue had not been resolved.

The EU’s tariffs had resulted in a 37 percent decline in American whiskey exports since 2018, according to the Distilled Spirits Council (DISCUS). The UK still has a tariff from the metal dispute on American whiskies, and that has cut exports there by 53 percent.

“We greatly appreciate the work of the Biden administration to remove the tariff on American whiskey,” DISCUS Vice President of International Trade Rob Maron told Wine-Searcher. “It has been a significant challenge for our industry, which was already facing a lot of challenges from the pandemic.”

The US has more than 2000 distilleries now, and distilleries in 37 states exported whiskey last year, according to the US Census Bureau.

“Often times the craft distillers will look to the EU or UK before exploring other states,” Maron said. “The removal of that 25 percent tariff will help craft distillers get back into those markets. We hope the Biden administration will pivot to the UK and work on an agreement to remove tariffs in that market.”

This ceasefire comes four months after the US and EU agreed to pause for five years a separate trade fight over airplanes that had led the Trump administration to hit French, Spanish and German wines, as well as some Scotch and Northern Irish whiskies, with 25 percent tariffs.

Hitting where it hurts

While the Boeing-Airbus subsidy dispute that led to tariffs on European wine had been simmering since 2005, Trump initiated the fight over metals in 2018. He announced tariffs on steel and aluminum and tweeted “Trade wars are good, and easy to win.”

Still stung by the airplane escalation, the EU decided to retaliate by targeting products from the home states of Republican party leaders, in hopes that they would pressure Trump to stop the trade war. Mitch McConnell, Senate majority leader at the time, is from Kentucky, so Bourbon was tariffed. Paul Ryan, House speaker at the time, is from Wisconsin, so Harley-Davidson motorcycles were added to the list. The move backfired when Harley-Davidson announced it would move some production overseas because of the tariffs. But Kentucky Bourbon can’t be produced overseas.

Maron said that until the wine tariffs, leaders on both sides of the Atlantic thought they could tariff the other’s products without any domestic blowback. That didn’t turn out to be the case.

“Our industry is extremely interconnected,” Maron said. “You have companies who are large exporters of Bourbons and American whiskies who are also large importers of Cognac and single malt Scotch. When the US and EU thought they were impacting countries on the other side of the Atlantic, they were really hitting companies in their own countries. And also hitting the hospitality sector.”

Maron said that cocktail culture has swept the world in large part based on classic cocktails based on American whiskies, and that the tariffs were slowing down a key aspect of pandemic recovery for restaurants and bars.

The metals agreement was not for a complete cessation of US tariffs. The EU will be able to ship 3.3 million metric tons of steel tariff-free into the US each year; anything more than that will be tariffed at 25 percent. The agreement places restrictions on products made in Europe that use steel from other countries, notably China. US Commerce Secretary Gina Raimondo said in a briefing for reporters that the deal allows the EU and US to try to work together to develop standards for steel and aluminum production that are cleaner than those currently used in China.  

“One of the focuses for this administration that we support is to rebuild our relationship with our allies,” Maron said.

And what better way to do that than by sharing a toast? One problem though: as different as Biden and Trump are, they do share one disturbing trait: neither one drinks alcohol. But only one of them has ever penalized those of us who do.