Does the current state of American partisan politics make you want a stiff drink? Well that frustration could become more intense as current trade policy begins to harm America’s alcohol producers.
In May, via executive action, the Trump administration imposed broad tariffs on imported aluminum and steel. And according to the latest reports, the White House is threatening additional tariffs on Chinese investment and tech exports.
The countries targeted by these measures are actively seeking retribution, and one of the first victims in their crosshairs is the American spirits industry.
President Trump insists that these trade penalties will strengthen U.S. industry and pressure foreign countries to enter into more advantageous trade deals. But while the strategy may be well-intentioned, his actions are extremely shortsighted and fail to take into account the reciprocal nature of imposing tariffs.
As we learn from history, tariffs are never a one-way street. The other side always hits back. Take, for example, the infamous Smoot-Hawley Tariff Act of 1930—which increased tariffs on imported products into the U.S. to near record levels. What followed was economic disaster.
Countries around the world began to address the new anti-trade initiative by imposing their own trade penalties on U.S. exports, making it very difficult and expensive for U.S. businesses to sell their products overseas. The end result was an extension of the Great Depression and what some believe to be a precursor to World War II.
Unfortunately, history is repeating itself. And so far, the results have been predictably similar.
Targets of Trump’s trade war are already firing back by slapping their own tariffs on U.S. exports. And for the American spirits industry, the consequences are severe.
According to data from the Distilled Spirits Council, 46 percent of U.S. spirits exports are already facing or will soon be at risk of retaliatory tariffs. Some examples include a 25 percent tariff on American whiskey imposed by the European Union, Mexico, and China, a 10 percent tariff on American whiskey imposed by Canada, and a 40 percent tariff on all American spirits imposed by Turkey.
The backlash is especially troubling considering that spirits exports inject roughly $1.64 billion into the U.S. economy every year. And all-in-all, the industry is indirectly responsible for 1.5 million American jobs—acting as the engine of employment for distillers and all other businesses that make production and distribution possible.
Supporters of Trump’s trade war may claim that the policies are necessary in order to combat so-called unfair trade practices, but tariffs will not level the playing field. Instead, circumstances will only worsen as American consumers and businesses bear the brunt of the retaliation, leaving wide swaths of the economy vulnerable to international politicking.
These moves are largely uncharacteristic of Trump’s otherwise pro-business, pro-growth agenda. Take for example his marquee legislation that lowered taxes for millions of Americans and businesses, resulting in higher than expected GDP growth and the lowest unemployment rate of the century. Imposing tariffs will only impede that progress.
As someone who claims to support business growth and put America first, Trump’s approach to trade policy is anything but consistent. Hopefully, these differences can be reconciled and free trade can be embraced once more. We can all raise a glass to that.
Sarah Longwell is the managing director of the American Beverage Institute.