Whiskey price

Oregon whiskey makers eagerly await EU tariffs lifted

Newly filled bottles of Westward whiskey at the company’s distillery in southeast Portland on October 8, 2021. Due to 25% EU tariffs on American whiskey, Westward says it has barely reached the break-even point for sales in the EU.

Kristyna Wentz-Graff/OPB

When Oregon single malt powerhouse Westward Whiskey decided several years ago to branch out into Europe, it set a competitive price for its whisky. After all, you don’t enter a new market by costing more than the next bottle on the shelf.

But in mid-2018, the European Union imposed 25% tariffs on American whiskey, in retaliation for President Trump’s tariffs on European steel and aluminum. Westward’s bottles hadn’t even hit the shelves before losing a large sum of money.

“We were immediately less profitable,” Westward CEO Thomas Mooney said.

Now, Westward and other Oregon craft spirit producers are welcoming the end of the EU tax on American whiskey, which will be lifted on January 1, 2022. UK tariffs on American whiskey remain in place for the moment.

“The end of whiskey tariffs in the EU is a huge positive development,” Mooney said. “The timing is spectacular.”

Oregon has more craft spirits producers than most states — about 77 — but relatively few export to Europe. Still, even some growers who have never sold in the EU are rejoicing, hoping that the end of tariffs will also bring financial relief at home.

Whiskey makers above a barrel

Think back to 2018. There was no coronavirus pandemic. Economic news was dominated by another source of volatility – President Trump’s escalating trade wars.

In June 2018, the Trump administration began applying tariffs of 25% and 10% on steel and aluminum imported from the EU, Canada and Mexico. Europe responded with taxes not only on American steel and aluminum, but also on jeans, Harley Davidson motorcycles and whiskey.

This put Westward in a bind. It was the newcomer to the block in Europe, which already produced most of the world’s luxury single malt whiskies.

Producers such as Westward had a choice: either absorb the tariffs – reducing profits – or pass on the higher costs. Westward decided to eat the fares. The company was trying to build a brand, not alienate potential customers.

“We can’t afford to go 25% more expensive just because our cost of operation is 25% higher,” Mooney said.

Since then, Mooney said, Westward has barely broken even in European sales.

Other whiskey producers have seen European orders dry up.

“The tap has closed. And the tap was doomed,” said Jake Holshue, production manager of Rogue Ales & Spirits in Newport.

US whiskey exports to the EU fell 37% after the imposition of tariffs, the Distilled Spirits Council of the United States announced this fall. The closure of bars and restaurants during the pandemic has compounded the effects of the trade war.

(L to R) Westward Whiskey employees Lynna Vu and Alyssa McMillen work on the bottling line at the southeast Portland distillery on October 8, 2021. Company co-founder Thomas Mooney welcomed the end of the European tariff of 25% on American whisky, in force on January 1, 2022.

(L to R) Westward Whiskey employees Lynna Vu and Alyssa McMillen work on the bottling line at the southeast Portland distillery on October 8, 2021. Company co-founder Thomas Mooney welcomed the end of the European tariff of 25% on American whisky, in force on January 1, 2022.

Kristyna Wentz-Graff/OPB

Rebuilding whiskey exports takes time

The Biden administration and the EU reached an agreement this fall. In January, more European steel and aluminum products will be able to enter the US market duty-free. And the EU will drop retaliatory tariffs on billions of dollars of iconic American products, including jeans and bourbon.

It’s good news.

But Holshue, who sits on the board of the American Craft Spirits Association, said it will take time for producers to rebuild their relationships with European customers.

“It’s not like flipping a switch, is it?” We are not just going to start flooding the European market with our spirits,” he said.

Additionally, international shipping is in crisis mode due to the pandemic, disrupting global supply chains.

Brad Irwin, owner of Oregon Spirit Distillers in Bend, said he’s not quite ready to export internationally. Still, he said, “we’re very grateful that those tariffs are gone.”

That’s because Irwin’s biggest seller is a four-year-old bourbon. And bourbon – including the famous Kentucky bourbon – was one of the iconic American products that Europe was aiming for.

Oregon Spirit Distillers Straight American Bourbon Whiskey is aged for four years in Bend, Ore.

Oregon Spirit Distillers Straight American Bourbon Whiskey is aged for four years in Bend, Ore.

Mighty Creature / Courtesy of Oregon Spirit Distillers

Irwin saw tariffs forcing more American-made bourbon to stay in America, where it could sell for less.

“It has greatly affected our sales in the United States, despite the fact that we are not even in Europe,” Irwin said. “But we just saw more and more brands hitting the market, taking up that valuable shelf space.”

Irwin said he had to skip some previously scheduled price increases to stay competitive. With the disappearance of tariffs, he hopes to realize this planned increase soon.

A Berlin bar has bigger problems

For American whiskey makers, the end of European tariffs is timely. They can cross off an item from an expense list that includes skyrocketing inflation, rising shipping costs, salary increases, and rising glass prices.

But for some European customers, rates may not be a priority, even if they’ve footed the bill themselves.

Sebastian Degens, co-owner of Stone Barn Brandyworks in Portland, has a small business exporting to Europe.

“It is limited, currently, to a whiskey bar in Berlin,” he said.

Degens sets aside some whiskey for his next delivery to the bar, along with grappa and a green nut liqueur. But he does not send them yet.

In early December, the bar owner was waiting to see if it would be closed again due to rising COVID-19 cases in Germany. Degens said the bar has just reopened, after being closed for months in 2021.

“Just the fact that his business survived all of this was the biggest concern,” Degens said.