How US alcohol tariffs will hike prices for Americans
The US is, by far, the biggest market for the top spirit makers among Western countries including Ireland, and most European wine and spirit producers.
Americans keen on a stiff drink at a bar should brace for a sobering rise in prices, with Scotch whisky connoisseurs potentially stomaching an extra $1 on average per drink, thanks to US tariffs on UK and European goods, according to an industry analysis shared exclusively with Reuters.
Other EU alcohol, like French Champagne, Irish whiskey and Italian prosecco, may see price rises, with the tariffs impacting some $10bn (€8.6bn) worth of such imports each year. Brands affected include Diageo's Guinness beer and Pernod Ricard's Jameson Irish whiskey.
US President Donald Trump's 15% tariff on European Union imports could raise wholesale prices of wine and spirits by more than 80 cents per gallon on average, with a smaller 3 cent increase for beer, the analysis, commissioned by trade association the Wine & Spirits Wholesalers of America, showed.
The levies could rake in $987.1m (€846.7m) in federal revenue, once lost sales are taken into account, it said, with the costs likely passed on to US businesses and consumers over time, causing sales and job losses.
The US is, by far, the biggest market for the top spirit makers among Western countries and most European wine and spirit producers.
After publishing further details this week of the trade agreement with the US, the European Commission said it will keep pressing for a preferential tariff for wine and spirits exports to the US that would spare the sector the 15% rate applied on most items.
"This one we didn't get in. But I can tell you that there is clear commitment from the European Commission to put it on the table," Maros Sefcovic said when asked if a preferential rate for the sector had been secured.
Sefcovic spoke after the European Union and the US detailed commitments made in the deal reached last month, which includes a 15% U.S. tariff on most imports from the bloc, including autos, pharmaceuticals, semiconductors and lumber. The same rate also applies to EU wine and spirits exports, despite industry efforts to get a lower, or even zero rate.
The US analysis assessed the impact of tariffs if the levies are passed on in full. Spirit imports previously enjoyed zero tariffs.
It found that US tariffs, including a 10% levy on UK products like Scotch whisky at the port, could significantly raise the price per bottle at a bar or other venue once additional costs from margins and taxes are added.
For a 750 millilitre bottle of Scotch, an average $1.92 tariff at the port could translate to a price increase of more than $12 per bottle at the bar, said the analysis, produced for WSWA by New York economic research firm John Dunham & Associates.
Assuming just over 12 two-ounce drinks per bottle, that would mean an additional $1 per drink at the bar on average.
Cutter Smith, who takes up the post of WSWA chairman in September, said that in some cases, wholesale prices were already on the rise.
"It is a company-by-company and, in some cases, brand-by-brand decision, but one thing is certain, if these tariffs stay in place, they will make their way to the consumer," he said.
The tariffs have hit just as the US prepares for the holiday season starting in October, when alcohol sales surge due to celebrations and gifting.
Pernod Ricard and Diageo declined to comment on the analysis.
Relatively small tariffs on Irish whiskey and Polish vodka also spiral upward as they make their way to bars or other venues, the analysis found, leading to an average price increase of 26 or 52 cents, respectively, per two-ounce drink.
The wine and spirits industries had hoped to win an exemption from EU tariffs, but found no relief in a framework trade deal secured on Thursday.
US sales are already in decline as inflation-weary or health conscious consumers cut back.
A Gallup survey in August found that reported US alcohol consumption hit its lowest on record, and competition from alternatives and other threats have also raised concerns over longer-term growth.
Analysts say higher-end brands preferred by wealthier consumers should be less sensitive to price changes, with cheaper and mid-range labels more likely to see demand decline as prices rise.
Some domestic producers may benefit if their wine and spirits are cheaper than those of imported rivals, but others are unsure or worry about retaliatory tariffs.
The analysis found that European wine would be hardest hit by the 15% levy, with wholesale prices rising by 86 cents per gallon on average, followed by spirits at 82 cents and beer at 3 cents.
Some alcohol producers ramped up US shipments ahead of the tariffs, creating a stockpile of goods to sell tariff-free.
And some spirit makers like Campari and Diageo have said they would not raise prices or would take other mitigation measures to prevent tariff costs being passed on for now.
- Reuters
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