Wine and spirits count the cost as the next round of US/EU tariffs come into force

10-Nov-2020 - Last updated on 10-Nov-2020 at 15:06 GMT

The EU implements new tariffs on US rum, brandy, vodka and vermouth today

The EU is adding new tariffs on US rum, brandy, vodka and vermouth today; following on from tariffs imposed by the US last year. Industry representatives on both sides of the Atlantic warn the alcohol industry is suffering from the ongoing Airbus/Boeing subsidies dispute, at a time when it also faces significant challenges from the pandemic.

Alcohol producers on both sides of the Atlantic have been caught up in the dispute over aircraft subsidies between the US and EU and their respective plane manufacturers (Airbus in the EU and Boeing in the US). Rulings from the World Trade Organization have allowed both sides to implement tariffs on goods as countermeasures – with wine and spirits effectively suffering as collateral damage from the aviation industry.

Since the latest round of tariffs in October 2019 (enforced by the US on EU products), US imports of Scotch Whisky have fallen by nearly 34% at a cost of $481m; while wine imports in affected categories from France, Germany, the UK and Spain have fallen 54%.

Meanwhile, American whiskey exports to the EU have fallen 41% at a cost of $300m since an earlier round of EU tariffs in June 2018.

A coalition of 20 beverage alcohol associations from both sides of the Atlantic are calling for an end to the ‘excessive and unwanted tariffs’.

Next round of tariffs comes into effect

In the latest development, the European Commission is increasing tariffs on a number of US products entering the EU, worth $4bn, a measure which comes into effect today. These new countermeasures bring the EU onto an ‘equal footing’ with the US, according to the European Commission, mirroring measures introduced by the US in October 2019.

The additional EU tariffs include 15% on aircraft as well as additional tariffs of 25% on a range of agricultural and industrial products imported from the US: including US rum, brandy, vodka and vermouth.

A coalition of 20 trade associations representing the US, EU and UK wine and distilled spirits and related sectors* is calling for the end of the ‘excessive and unwanted tariffs’, warning they will further damage the once-booming transatlantic drinks trade.

“Hospitality businesses and our consumers, as well as producers, wholesalers and importers of distilled spirits, wine, and beer are being slammed from both sides of the Atlantic in an aircraft dispute wholly unrelated to the drinks business,” says the coalition. “This is on top of the closings of restaurants, bars, distilleries and winery tasting rooms because of the COVID-19 pandemic.”

“These additional tariffs on US products will further degrade the difficult situation the wines and spirits industries have been facing since additional tariffs were imposed in 2018.”

Why does an aviation dispute affect wine and spirits?

In a dispute that dates back some 15 years, both the EU and US claim each other's plane manufacturer (Airbus in EU and Boeing in the US) are unfairly subsidised.

The WTO has ruled that EU supported Airbus with subsidized loans, while the WTO also handed the EU a victory in its counter case against Boeing.

Both sides are therefore entitled to enforce countermeasures.

In October 2019, the US imposed a 25% tariff on Single Malt Scotch Whisky; Single Malt Irish Whiskey from Northern Ireland; liqueurs and cordials from Germany, Ireland, Italy, Spain and the United Kingdom, as well as certain wines from Germany, France, Spain and the UK.

“This has resulted in a painful 34% decline in Scotch Whisky exports, a 28% decline in liqueurs and cordials exports and a 54% decline in wine exports," reports the coalition. "Similarly, the EU imposed a 25% tariff on Bourbon and other US Whiskeys since June 2018 in response to US tariffs on steel and aluminum, which has resulted in a 41% decline in American Whiskey exports to the EU.”

The coalition also notes the imposition of additional tariffs will force more businesses to close their doors and lay off more workers in sectors already 'severely weakened' because of the global pandemic and related restrictions.

“The US and EU need to return to the negotiating table without delay,” the coalition concludes. “They need to immediately suspend the current tariffs as they negotiate an agreement to simultaneously eliminate additional tariffs on distilled spirits and wine in these disputes unrelated to the sector.”

* The 20 organisations in the coalition are: