American bev-alc suppliers are still in the crosshairs of a trade war. On Sunday, President Donald Trump reignited trade tensions with the European Union, threatening to bring back policies that hit American spirits exports hard in his first term.
Last week, bev-alc importers got a brief reprieve when Trump delayed his first round of tariff threats, a 25% levy on imports from Mexico and Canada. But on Sunday, Trump announced from Air Force Once that he has a new target: a sweeping 25% tariff on steel and aluminum on all imports. Those tariffs are familiar in particular to American whiskey suppliers.
In 2018, Trump also imposed global tariffs on foreign steel and aluminum, slapping a 25% tax on imported steel and a 10% tax on imported aluminum. While most of the tariffs were eventually rolled back, the EU responded by unfurling retaliatory tariffs, singling out iconic American products like motorcycles, cranberries, and bourbon and whiskey. In early 2022, the Biden administration suspended the steel and aluminum tariffs on the EU and the EU agreed to suspend the 25% tariff on American whiskeys. But that truce expires on April 1 when duties on American whiskeys at 50% are slated to return if there is no agreement or the EU does not extend the suspension of its tariff.
“I think it’s just a question mark as to what the EU will do: If they will honor that initial timeline or if things will change,” in regards to Trump’s announcement on Sunday, said Christine LoCascio, chief of policy, strategy and membership of the Distilled Spirits Council of the U.S. (DISCUS).
Several European leaders have said they would be quick to retaliate on the renewed threats. The European Commission said on Monday that it would “react to protect the interests of European businesses, workers and consumers from unjustified measures,” but remarked that it will not respond to broad announcements without details or written clarification.
“At this stage, we have not received any official notification regarding the imposition of additional tariffs on EU goods,” read the statement.
The metal tariffs are part of a larger trade policy: Trump said he plans to make an announcement about reciprocal tariffs later this week. He previously said he would impose tariffs on other industries, and laid on an additional 10% tariff on all products from China last week.
The tariff could also impact important materials for the larger beverage industry. Imported aluminum from many sources are already subject to the 2018 tariffs of 10% (Section 232), and it’s unclear if the new tariffs would be added on. President Joe Biden replaced tariffs on European and Japanese steel with a tariff rate quota system – in turn removing nearly half of the imports listed in Section 232. But in 2022, the U.S. beverage industry had paid more than $1.4 billion in aluminum tariffs since they were imposed in 2018. The Beer Institute had previously advocated for the removal of the aluminum tariffs.
The Brewers Association (BA), which represents the country’s small and independent craft brewers, said in a statement it is “closely monitoring the new administration’s proposed tariffs.”
“If implemented, they could place a significant financial burden on brewers, many of whom rely on imported materials, ingredients, and equipment,” the BA said. “Tariffs could have potential impacts across the board for brewers, especially if they do not exempt Canada and Mexico, who are some of the largest exporters of aluminum and steel to the U.S. and who were exempt from earlier tariffs on these same products.
“If steel tariffs go into effect, breweries could see increased prices for kegs, steel tanks, brewhouses, and building materials, while a 25% tariff on aluminum would further increase the cost of cans for small producers,” the BA continued. “The Brewers Association will continue to advocate for its members in an effort to minimize unnecessary financial strain on America’s small and independent brewers.”
Draft beer, which is nearly universally packaged in stainless steel kegs, accounted for 8.9% of total beer volume, according to the Beer Institute (BI), which counts the country’s largest brewers among its membership. Draft skews more toward craft beer, which accounted for 47.2% of all dollars spent on draft beer at bars and restaurants in the 12-month period ending March 31, 2024, according to CGA, the on-premise data arm of NIQ.
Cans accounted for 64.1% of all beer volume in 2023, according to th BI. Among BA-defined craft brewers, cans’ share is even larger, maxing out at 70% in Q2, according to a report from the BA.
Spirits advocates have been urging government leaders for years to keep their industry out of the trade battle.
“A 50% tariff on America’s native spirit will have a catastrophic outcome for the 3,000 small distilleries and the jobs they provide across the United States,” said Chris Swonger, president and CEO of DISCUS, in a statement Monday. “The U.S. and EU spirits sectors have fair and reciprocal trade and should be excluded from any retaliatory measures.”
Swonger added that the organization is going to do “everything we can to make sure this industry continues to thrive and flourish in an environment of zero for zero tariffs,” during DISCUS’ annual briefing on Tuesday.
Exports Rebounded After Tariffs Were Lifted
The imposition of the 2018 whiskey tariffs hit American whiskey hard, with exports to the EU dipping -20%, from $552 million in 2018 to $440 million in 2021, according to DISCUS. Total spirits exports also fell -12% in the period. The numbers have since rebounded for major distillers. Approximately 40% of U.S. spirits were exported to the EU in 2023 (totaling $883 million), making it the largest export market. American whiskey exports to the EU rebounded after the tariffs were lifted by +60%, reaching more than $700 million.
But craft exports are at a third of the level prior to when the tariffs were implemented. Some craft distillers have stayed in the game, while others have given up – the anxiety of the tariffs returning enough to look at markets elsewhere. Last year, U.S. craft exports are about one-third of what they were in 2017.
“We’re facing a situation where brands have a bit of a depressed market in the United States. Export is a way to grow,” said Sonat Birnecker Hart, president and founder of Chicago’s Koval Distillery, who after 16 years in business has also consulted for hundreds of distilleries.
Koval was among the country’s first craft distilleries to begin exporting, and the distillery powered through the tariffs in 2018. The threat of tariffs creates an uncertainty among European distributors, said Hart, requiring distillers to pay more to engage in marketing efforts and inspire confidence in partner distributors.
“I can tell you, there are plenty of other brands, craft or otherwise, all over the world that are vying for that American shelf space that we were able to carve out for ourselves in many of these retailers,” Hart said.
Major bev-alc groups could also be impacted across the board by the possibility of tariffs on Mexican and Canadian imports or retaliatory moves by the EU. In December, Lawson Whiting, Brown-Forman president and CEO, described the possible tariffs as “a very painful situation.” The whiskey giant is the top exporter of U.S. spirits.