When Becky Harris co-founded Catoctin Creek Distillery in 2009, she believed her target market went beyond Loudoun Valley and its rolling northern Virginia hills. Though most business would come from the mid-Atlantic region, she also set her sights on customers across the Atlantic.
“We worked really hard,” Harris says of eking out a distribution network and gradually building a consumer base in the European Union. “Just about the time we started to make progress in the market was when the tariff battle really accelerated. And it basically killed our business there.”
It was 2018. The EU had just imposed a 25 percent tariff on American whiskey in retaliation for tariffs imposed by the United States on European steel and aluminum imports.
In the tumultuous years that followed, Catoctin Creek Distillery and countless other members of the U.S. beverage alcohol industry would find themselves collateral damage in transpacific and transatlantic industrial trade wars.
Though a détente between the U.S. and EU has eased the feud, this year’s presidential election risks upending that. Despite vastly divergent approaches, the campaigns of both former President Donald Trump and Vice President Kamala Harris have expressed support for tariffs—indicating the potential return of the trade wars, which some fear will destabilize an already precarious beverage alcohol market.
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Aircraft dispute threatened imported wines and spirits
For more than 20 years, the U.S. has accused the EU of subsidizing airplane manufacturing in violation of international trade agreements and to the detriment of U.S. interests. In October 2019, then-President Trump imposed a 20 percent tariff on certain wines and spirits imported from France, Germany, Spain, and the U.K., and even threatened a 100 percent tariff in late 2019. The parties eventually agreed to pause the dispute, and President Biden suspended these tariffs in July 2021 for a period of five years.
During that dispute, however, importers and distributors had to respond quickly to the sudden price increases. “The most immediate impact was a price increase that we passed [on to buyers] to cover the cost of the tariffs,” says David Kenney, the partner and vice president of Uncorked, an importer and distributor of French wines in New Orleans. “We did not initially pass along the full cost of tariffs, choosing to reduce our profit margin, along with our importer partners doing so as well. As the timeline progressed, we eventually raised our prices to cover the full tariff cost.”
According to Veseth, these tariffs fell hard on U.S. importers and distributors. “They were at the front line. They had to pay the tariffs. They found themselves paying for them on products they contracted for months before or even years before. And they found retailers were hesitant to raise prices. They were caught in a squeeze.”
Tariffs on European wine and spirits don’t necessarily benefit domestic producers, either. Jason Haas, the partner and general manager of Tablas Creek Vineyard in Paso Robles, California, submitted a public comment to the Office of the U.S. Trade Representative in December 2019 in opposition to the then-proposed increase of the tariffs of up to 100 percent. “In my experience, distributors react to the loss of a major supplier (a similar impact to these tariffs) by attempting to source new wines for their portfolio, rather than by selling more wine from their existing suppliers, many of whom are unable to increase production in the short term,” Haas wrote.
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