The longstanding trade tensions between the United States and the European Union (EU) have intensified, with a new wave of tariffs targeting the lucrative spirits market. This dispute, which traces its roots to earlier conflicts over steel and aluminum tariffs, is once again threatening economic ties between the two regions.
A Brief History of the Tariff Dispute
The conflict began in 2018 during former President Donald Trump’s first term, when the U.S. imposed tariffs of 25% on steel and 10% on aluminum imports from the EU. In retaliation, the EU enacted a 25% tariff on American spirits, particularly whiskey. Despite temporary suspensions under President Joe Biden’s administration, the EU plans to reinstate a 50% tariff on American whiskey starting April 1, 2025.
This decision follows the EU’s announcement to target additional U.S. spirits, including gin and liqueurs, as part of broader countermeasures. The tariffs are viewed as a direct response to the U.S. increasing aluminum tariffs to 25% and resuming other trade barriers.
Trump’s Proposed Countermeasures
Former President Trump, using his platform on Truth Social, issued a stark warning in response to the EU’s actions. He threatened a 200% tariff on all wines, champagnes, and other alcoholic products imported from EU member countries, particularly France. Trump described the EU as “hostile and abusive” in its trade practices, claiming these measures aim to disadvantage the U.S.
“This will be great for the wine and Champagne businesses in the U.S.,” Trump stated, emphasizing potential benefits for domestic producers if the EU does not retract its tariffs.
Impact on the Spirits Industry
The trade dispute has already caused significant economic fallout for both sides. American whiskey exports to the EU, historically the largest market for the product, declined by 20% between 2018 and 2021, dropping to $440 million. EU producers of brandy and cognac are also grappling with additional pressures, including China’s ongoing anti-dumping investigation, which has exacerbated challenges for European spirits exporters.
Pauline Bastidon, trade and economic affairs director at SpiritsEurope, expressed deep concern about the cyclical retaliation. “This cycle of tit-for-tat retaliation must end now,” she stated, calling for both the U.S. and EU to de-escalate and remove spirits from unrelated trade disputes.
Broader Implications for the Sector
The zero-tariff agreement on spirits trade between the U.S. and EU, which had been in place since 1997, facilitated significant growth in transatlantic trade, with a 450% increase recorded between 1997 and 2018. Industry leaders warn that reinstating tariffs could reverse this progress and harm the interconnected value chains supporting jobs in rural areas and beyond.
Chris Swonger, president of the Distilled Spirits Council of the U.S. (Discus), echoed these concerns, emphasizing that the tariffs jeopardize years of recovery and growth. “This will curtail growth and negatively impact distillers and farmers across the country,” Swonger said, urging for a resolution that aligns with the historic model of tariff-free trade.
Preparing for the Fallout
As the tariff deadlines approach, producers on both sides of the Atlantic are bracing for potential disruptions. American whiskey brands like Luxco are accelerating shipments to the EU ahead of the tariff hike, while European spirits exporters face declining sales and geopolitical uncertainties.
The EU is also consulting on potential second-wave tariffs targeting other U.S. goods, with public input open until late March. The European Commission’s decisions could broaden the scope of affected products, further escalating the dispute.
Calls for Resolution
Trade bodies on both sides have united in urging policymakers to prioritize dialogue and resolve the broader disputes unrelated to the spirits industry. The Distilled Spirits Council and SpiritsEurope have called for a return to the zero-tariff framework, emphasizing the importance of maintaining a balanced trade relationship.
Bastidon summed up the sentiments of many in the industry: “Keep spirits out of unrelated disputes while governments work to resolve their differences. This is about protecting a vitally important transatlantic trade relationship.”
What’s Next?
As the deadline for the reinstated tariffs looms, both the U.S. and EU face mounting pressure to find common ground. The potential for economic repercussions on producers, farmers, and consumers underscores the urgency of resolving these trade tensions. For now, the spirits industry remains a pawn in a larger geopolitical chess game, with far-reaching consequences for all involved.
Businesses and trade advocates hope that cooler heads will prevail to prevent further disruption to one of the most significant global trade partnerships in the spirits sector. Only time will tell whether the two sides can navigate these challenges and restore a cooperative, tariff-free environment.
