The increase in tariffs threatened by the US on goods, particularly in this case, wines and spirits, could be as much as 200%. This is in response to a hike in tariffs proposed by the EU on certain spirits coming into the EU from the US. This, in turn, was as a reaction to tariffs put forward by the US on aluminium and steel, imported into the US from the EU.Â
Given the rather erratic nature of decision-making in the US, we can be uncertain if these proposals will have any veracity, and thus what the further implications will be.Â
Impact in the US
In 2023, 17% of the wines and spirits consumed in the US were imported from the EU. If the tariffs are imposed, this figure will naturally decrease as the US will look to import from other countries who have not retaliated by imposing tariffs on US exports, or they will look to their home producers to fill the void. This will have an effect on maritime jobs throughout the network with a decrease in demand for shipping services, customs brokering and there will be a disruption in supply chains. This will jeopardize jobs across the globe as well as the US.
With a proposed tariff increase of up to 200%, there will be a reduction in alcohol, purchased and consumed, in the US, that originated in the EU. This will continue for as long as the tariffs are in place.Â
This will, in turn, mean, if we are to assume that US citizens are keen to keep up their alcohol consumption, that there will be a switch to less expensive domestic wines and spirits. Possibly worryingly, this could cause an increase in toxicity dilemmas in the US since a consumption of cheaper alcohol can cause an upsurge in problems such as trauma, chronic diseases and social issues. Alternatively, for some, the opposite will apply as a reduction in disposable income, because of the threat to their jobs, will mean less inclination to spend it on alcohol.
Impact on the EU
About 32% of EU spirits and wine are sold in the US. The consequences of a potential dry up in the market for their goods could be dramatic. It is likely, in the event of a tariff hike that EU exporters will store products until after the increase, which is fine for wines and spirits, but less so for beer.Â
Some producers will seek markets elsewhere and also reduce the price for their domestic produce in order to sell within the EU. Reduced prices generally result in an increase in consumption and thus potentially a rise in alcohol-related harm. Some people drink more to offset the feelings associated with problems in life, such as a recession, although this is not the case for all parties.
The Larger Picture
If the US wishes to stimulate the home market for wines and spirits it will be faced by certain issues. Wine vines take years to establish and thus a gap in the chain will be experienced. The same could be said for the spirits industry.
Also, some countries feel let down by the US because of the proposed increased tariffs. Canada, its neighbour, feels a loss of trust of its trading partner, and this feeling pervades across the globe. There is highly likely no winners from a trade war, only losers.
