US whiskey exports slump amid retaliation for Trump tariffs

Lizzy Alfs
American whiskey is booming, but tariffs imposed last year delivered a major blow to whiskey exports and continue to threaten the industry’s growth.

American whiskey is booming, but tariffs imposed last year delivered a major blow to whiskey exports and continue to threaten the industry’s growth.

That’s the message from the Distilled Spirits Council of the United States (DISCUS), which on Thursday released 2018 spirits export data.

American whiskey exports around the world climbed 28 percent in the first half of 2018 as the category continues to gain global popularity. But exports dropped 11 percent in the last six months of the year after Canada, Mexico, China and the European Union (EU) imposed whiskey tariffs as high as 25 percent in response to President Donald Trump’s steel and aluminum import tariffs.

Jack Daniels 2018 Rank: 8th 2017 Rank: 9th Parent company:

American spirits exports are typically higher in the second half of the year with holiday sales.

“With the full year data in hand it is clear that the retaliatory tariffs are having a significant and growing impact on American whiskey exports, which had been a bright spot for U.S. agriculture exports,” DISCUS CEO Chris Swonger said in a statement. “The damage to American whiskey exports is now accelerating, and this is collateral damage from ongoing global trade disputes.”

Still, 2018 marked the ninth straight year of record spirits sales and volumes, and American whiskey exports grew 5.1 percent last year. But that’s a significantly slower rate of growth than the 16 percent recorded in 2017.

American whiskey exports to the EU — which accounted for nearly 60 percent of all American whiskey exports in 2018 — plummeted 13.4 percent after the 25 percent retaliatory tariff was imposed last summer. Whiskey exports to the EU grew 33 percent in the first half of 2018, driven in part by distillers including Jack Daniel’s sending more whiskey overseas ahead of the tariffs.  

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American whiskey exports to the EU still reached a record $704 million in 2018, up from $667 million the previous year.

Meanwhile, total U.S. spirits exports hit a record $1.8 billion last year, but the rate of growth slowed significantly from 2017.

The whiskey and bourbon industries are key economic drivers and employers in both Kentucky and Tennessee.

Kentucky produces 95 percent of the world’s bourbon supply. The state's spirits industry, which produces brands like Jim Beam, Maker’s Mark and Woodford Reserve, employs more than 20,000 people and pours $8.6 billion into the Kentucky economy each year, according to the Kentucky Distillers Association. Kentucky exported over $450 million of whiskey in 2017, with more than half of all exports going to the EU.

In Tennessee, whiskey is one of the state’s top exports, thanks in large part to mega distiller Jack Daniel’s in Lynchburg, which sells whiskey in more than 160 countries. The Volunteer State is home to 30-plus distilleries, although only some of those export outside the U.S., including Jack Daniel’s and competitor George Dickel.

Jack Daniel’s owner Brown-Forman started feeling the impact of the whiskey tariffs in October, the company's chief finance officer told analysts on a conference call in March. If the tariffs remain in place, the annualized cost to the company would be roughly $125 million a year. Brown-Forman has been absorbing the extra costs.

“While tariffs remain a near-term challenge on American whiskey exports, we'll weather the storm as we have so many other challenges over the last 150 years as we look to create value for our shareholders,” Brown-Forman CEO Lawson Whiting said.

Reach Lizzy Alfs at lalfs@tennessean.com or 615-726-5948 and on Twitter @lizzyalfs.

This article originally appeared on Nashville Tennessean: US whiskey exports slump amid retaliation for Trump tariffs