U.S. Distillers Celebrate End to Retaliatory Tariffs in E.U., Look to Make Up For Lost Revenue

American distillers are optimistic after the U.S. and European Union announced a weekend agreement to end retaliatory tariffs on some products after whiskey exports previously plummeted from 2018 to 2020.

The tariffs were targeted on American whiskey and other U.S. products in response to former President Donald Trump's decision to impose tariffs on European steel and aluminum.

American whiskey exports to the European Union plunged from $702 million to $440 million between 2018 and 2020, a 37 percent decrease, according to the Distilled Spirits Council of the United States.

Scott Harris, the Catoctin Creek Distillery co-founder and general manager in Virginia says it could take a few years to regain the lost business from Europe, but is looking to start reshipping its whiskey to the EU markets.

"We have a chance to go over to Europe now and compete fairly and bring our products back in at competitive prices. This is what we've been waiting for the whole time," Harris said.

For more reporting from the Associated Press, see below.

EU Whiskey Tariffs
American distillers are optimistic after the U.S. and European Union announced a weekend agreement to end retaliatory tariffs on the products, after whiskey exports previously plummeted in 2018 to 2020. On June 20, 2018, Catoctin Creek Distillery whiskey is on display in a tasting room in Purcellville, Va. Steve Helber/Associated Press

"This is an amazing reprieve -- nothing but happiness and jubilation," Amir Peay, owner of the Lexington, Kentucky-based James E. Pepper Distillery, said. "There are some obstacles and problems that we will need to deal with, as will everybody. But that's business."

For Kentucky bourbon producers, sales to the EU plummeted by nearly 50 percent in 2020 alone, the Kentucky Distillers' Association said. The EU accounted for 56 percent of all Kentucky whiskey exports in 2017 — the year before the tariffs hit — but its share shrank to about 40 percent by 2020.

In touting the agreement by President Joe Biden's administration to settle the trade dispute, U.S. Commerce Secretary Gina Raimondo said "this deal is good for Kentucky's workers and the iconic Kentucky bourbon industry."

Kentucky Gov. Andy Beshear said Monday that Raimondo "went to bat" for the state, pointing to their multiple conversations about how hard the EU tariff was hitting Kentucky's distilling sector.

Tariffs amount to a tax, which producers could either absorb in reduced profits, or pass along to customers through higher prices — and risk losing market share in competitive markets.

Distillers will have to decide how much of their finite whiskey supplies will ship to Europe. They can't simply crank up production for immediate inventory bumps. Most bourbons typically age four to eight years before reaching market, getting their flavor and golden brown color during aging.

That patience will be necessary for American distillers in winning back space on EU liquor shelves, Peay said. His Kentucky distillery's signature bourbon and rye brand is James E. Pepper 1776.

"It's not easy to repair the damage that's been done," he said, adding recovery will be complicated further by supply chain woes brought on by the pandemic. And there's still a lingering United Kingdom tariff on American whiskey owing to a separate trade dispute.

Nonetheless, he predicted a European comeback for U.S. spirits in the next few years, adding, "we are going to start seeing some serious mojo come back into Europe from the American whiskey space."