US President Donald Trump’s crusade against “unfair trade practices” has caused collateral damage not only in the US beer industry but also in the export of US whiskey. Brown-Forman, maker of the top-selling Tennessee whiskey brand Jack Daniel’s, is worried about retaliation measures of US trading partners if Trump should stick to his rigid course of action to reduce the US trade deficit by imposing import taxes on certain imported goods.
“Brown-Forman could be an unfortunate and unintended victim of the policy,” explained Paul Varga, CEO of Brown-Forman. “The overwhelming majority of our products are made here in America and over the last few years, I’d just cite, we’ve been investing heavily in our American manufacturing expansion.” However, more than half of Brown-Forman’s products are exported, with the majority going to the UK, Australia, Mexico, Germany, France and Poland.
Mexico, China, The European Union and other trading partners have threatened to impose inter alia tariffs on American liquors, like bourbon, if the United States presses on with its protectionist trade policy.
In March, the European Union said it was planning to levy tariffs on imports of US whiskey, peanut butter, cranberries, motor cycles and orange juice in retaliation to Donald Trump’s promised new imposts on steel imports. What sounds like “peanuts” is in reality a strictly targeted measure against US President Donald Trump himself, who has most of its voters in rural areas, which will be hit most by the proposed tariffs.
Harley Davidson manufactures their famous eponymous motor cycles in Wisconsin where Trump won the 2016 presidential election and Republican House Speaker Paul Ryan has his constituency. Orange juice is being produced predominantly in Florida, one of the swing states where Trump won his presidential election with a razor-thin lead. And last not least bourbon whiskey comes from Kentucky and Tennessee, two states with a faithful electorate for Trump and a home state of Republican Majority Leader in the Senate, Mitch McConnell.
While the European Union is still discussing these measures, Mexico and China have already created facts.
Last week on June 5, Mexico imposed tariffs on $3 billion worth of US exports in response to US steel and aluminum tariffs on imports. Bourbon whiskey is one of the goods on the list of higher taxed products.
This Saturday, less than 24 hours after the United States imposed new tariffs on China, also Beijing fired a return salvo. Chinese officials said that beginning July 6, the country will impose an extra 25% tariff worth $34 billion on 545 products from the United States including soybeans, orange juice, whiskey, and others. Additional tariffs on 114 more U.S. items, covering chemical products, medical equipment and energy, will be announced later.
Already earlier this year US beer makers opposed Trump’s plans to increase tariffs on US imports of steel and aluminum. Jim McGreevy, President and CEO of the American Beer Institute (BI) said in February that "aluminum is critical to the well-being of America's beer industry as more than half of the beer produced annually is packed in aluminum cans or aluminum bottles.” (inside.beer, 16.2.2018) In April, McGreevy reported that aluminum prices had already surged by 25% in the last two months to their highest level in seven years. (inside.beer, 24.4.2018)
As a consequence Gavin Hattersley, the CEO of MillerCoors, told Bloomberg on Wednesday that his company might have to have to cut back on investments, new hires, or other costs and expenses or to raise prices to compensate for losing $40 million in profits due to aluminum tariffs. “I can’t just go to the shareholders and say, ‘You’re just going to have to accept my profit’s going to be $40 million less,'” he was quoted as saying.
Lately, the United States Trade Representative (USTR), after hearing from trade associations and other business groups removed 515 items, including certain steel items that are used in making brewing equipment. However, aluminum used for beer cans is still on the list.