Trade war continues, but it’s not as bad as it could have been

Booze drinkers along with restaurant and bar owners face steep prices as a trade war continues between the United States and European Union.

But it’s not as bad as it could have been. 

It’s a trade battle with an ally. European Union tariffs on U.S. alcohol were scheduled to double June 1 to 50 percent. The tariffs remain high. But the EU backpedaled on a promise to jack up tariffs even further. 

This trade battle started a couple of years ago. The U.S. upped tariffs on aluminum and steel from the EU. The EU retaliated by hitting U.S. products like Kentucky bourbon with a 25 percent tariff. 

"I don't think people realize the economic spin-off that that has in Kentucky," said Rep. James Comer (R-KY) on Fox. "It's not just the distilleries themselves and the bourbon trail and all the travel that comes with it. You've got a lot of farmers that grow the grain for the bourbon in Kentucky and also in my district. All the barrel makers." 

"You want to have a free flow of goods and markets to meet consumer demand. And when you throw big tariffs on it, it distorts it and makes it not fair," said Rep. Don Beyer (D-VA), a member of the House Ways and Means Committee’s trade panel.

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This was tit for tat. So, the U.S. tagged Irish and Scotch whisky with a 25 percent tariff due to a trade dispute with Airbus, the European aerospace consortium.

So, with a 25 percent on Scotch, it was like paying for five bottles instead of four.

The EU is America’s largest trading partner. American bourbon exports plunged 41 percent to the European Union. American imports of Scotch whisky dropped 39 percent.

People looked for alternatives during the pandemic. So they imbibed liquor not affected by the tariffs — like tequila.

"It's certainly not good for our domestic manufacturers. It’s certainly not good for those overseas making Scotch whisky," said Beyer.

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The tariffs are a double whammy for a hospitality industry already waylaid by the pandemic. Restaurants are now struggling to find workers as customers trickle back in. But restaurants and bars may have only one alternative: pass along higher liquor and alcohol costs to patrons.

"A typical restaurant collects 30 to 40 percent of their profit selling alcoholic beverages," said Rep. Earl Blumenauer (D-OR), chair of the Ways and Means trade subcommittee. "This is one of the reasons why we fought so hard to have some support for restaurants to keep them alive so that we don't have a permanent detrimental" to restaurants. 

The spirits industry enjoyed duty-free status from 1997 until 2018. That’s why they want to roll back the tariffs to zero.