By Richard Thomas
Encouraged by its recent success in finalizing a new trade deal with Japan, the European Union (EU) has responded to talk of new tariffs to protect American steel by U.S. President Donald Trump with warnings that such measures would provoke immediate counters against American exports to the European free trade zone. One class of exports that would be high on the list of potential targets are American whiskeys, specifically Kentucky Bourbon and Tennessee Whiskey.
Last week at the G20 Summit, EU President Jean-Claude Juncker said, “I am telling you this in the hope that all of this won’t be necessary. But we are in an elevated battle mood.”
According to EU officials, new steel tariffs would put U.S. agriculture products in the cross-hairs, and, in the midst of the bourbon boom, whiskey is a prime target for retaliatory trade measures. The EU would also litigate against any steel tariffs at the World Trade Organization.
Under a 1962 law, the President is allowed to adjust tariffs to respond to a national security threat caused by foreign imports. This law has been invoked only twice, once by Richard Nixon and again by Gerald Ford, and in those instances the national security concern cited was the global oil crisis.
Unlike the similarly sized Scotch Whisky industry, which is overwhelmingly export-oriented, the vast majority of production of the American Whiskey industry is consumed domestically. The U.S. could absorb that production, plus the single largest share of Scotch Whisky, Irish Whisky and Canadian Whisky exports, because it has long been the world’s most lucrative whiskey market by a large margin.
Spurring the bourbon boom has been greater emphasis on selling American whiskey abroad. The $8.5 billion Kentucky Bourbon industry exported more than $1 billion worth of products in 2013, and Tennessee’s Jack Daniel’s is now the second biggest whiskey brand in the world and exports roughly two-thirds of its output, outsold only by Johnnie Walker.