Trump Tariffs Come Back To Bite Whiskey Distillers

Posted: Jun 28, 2018



Whiskey distillers across the country are being hurt as America's trading partners slap tariffs on U.S. goods, retaliatory measures for the Trump administration's imposition of tariffs on the European Union and Canada.

The administration's tariffs are aimed at making the steel industry more competitive and reducing U.S. trade deficits with various countries. But that's having effects on other industries, including cancelled orders, lower profits and lost jobs.

Distilleries are one of many types of businesses already dinged by the promise of tariffs from China, Canada, Mexico and the European Union. Other goods affected include pork, apples, soybeans and motorcycles.

Dry Fly Distillery in Spokane, Washington, was scheduled to deliver 2,000 cases of whiskey to Ontario, Canada, but that order has since been canceled. Owners at the 11-year-old distillery expect to get hit even harder by a 25 percent tariff on American-made whiskey which is set to go into effect next week.

Going forward, owner Don Poffenroth said about 10 percent of Dry Fly's international sales are expected to come to an end.

"It makes me uncompetitive in the market," Poffenroth told KREM. "You take 10 percent away from a small business, it's significant."

Colin Spoelman, co-founder of Kings County Distillery in Brooklyn, New York, is facing a similar fate. His business, which opened in 2010, has been selling specialty whiskey in the United Kingdom and Canada for about half a decade. The majority of the company's sales are in New York, with about 20 percent coming from outside the state and international markets.

Spoelman says some distributors are now averse to carrying his product, since they would need to sell at a higher price to offset the penalties.

"Already we've seen our Canadian distributors throw up their hands and say, 'I don't really know what we can do here,'" Spoelman told CBS MoneyWatch.

On Monday, Jack Daniel's Tennessee Whiskey producer Brown-Forman said prices would increase in the European Union because of the bloc's new 25 percent tariff. The increase will take effect over the next couple of months as stockpiled cases of it are sold off, the Associated Press reported.

Unlike larger distilleries, Kings County produces small batches, which makes it difficult to stockpile reserves, Spoelman said.

Larger shops "have the wherewithal to stockpile those cases and beat the tariffs," Spoelman said. "That's certainly not something that we could do or our distributor partners could do."

He added, "I think it does hit the small guys the hardest."

As for whether a change in price may allow his products to continue to be sold internationally, Spoelman said much of that is up to the distributors. They must decide whether or not a price hike to offset the tariffs is viable. He's hopeful that strong personal working relationships will bridge the divide, but is uncertain.

"The UK had some difficulties with the valuation of the pound, we cut them a little bit of a break after Brexit, we accommodated them on the price a little bit...maybe in this case they can adjust back to us," Spoelman said.

He added, "We're just so close with Canada and [the trade dispute] is really annoying to a lot of Canadians--they may be not quite as magnanimous about this."

By Jillian Harding 
June 28, 2018
Source: CBSNEWS.com





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