Opinion: Daily Journal

Tariffs targeting China would hurt America’s native spirit, N.C. producers, consumers

Hitting steel and aluminum imports with tariffs amounts to a tax on N.C. craft breweries and could lead to retaliation against bourbon makers, too

Beer taps at Raleigh Brewing Co. (CJ photo by Kari Travis)
Beer taps at Raleigh Brewing Co. (CJ photo by Kari Travis)

The ill-advised and widely denounced tariff rhetoric coming from the White House has stressed manufacturers and upset the markets.

The initial targets were steel and aluminum, specifically from China. The move apparently came from some misguided belief about current-day Andrew Carnegies making tracks to Pittsburgh to set up shiny new mills along the Monongahela and Ohio rivers.

That would mean destroying the shopping centers and sports complexes that took their place, but let’s not get off point.

My initial reaction — because I take a particular interest in the subject — was the effects on brewers, of which North Carolina has more than a few.

As Fortune wrote, Molson Coors and Heineken — two of the so-called “big boys” of the brewing industry — sent the president a letter about the potential tariff, saying it could cost brewers other drink producers an extra $256 million annually, because the cans would cost more.

“The Beer Institute, a trade group,” Fortune reported, “estimated that the tariff would create the equivalent of a $347.7 million tax on beverages served in cans, according to The Wall Street Journal.”

The president incessantly says bringing more jobs to America tops his agenda, yet any jobs gained in the alcohol industries because of lower excise taxes would be lost because of increased costs brought on by tariffs. “Tens of thousands” of jobs, quoting the Fortune story, is how the Beer Institute describes it.

This, remember, is an American leadership proposing to hurt American companies and workers. China didn’t blink at the bluster, threatening to slap a 25 percent levy on 106 U.S. products, including types of whiskey such as bourbon, writes CNBC.

Earlier this year, as the Trump administration was considering what action to take on steel and aluminum tariffs, the European Union hinted at retaliating with trade taxes on Kentucky bourbon, CNBC says. In 2017, Kentucky exported $154 million worth of bourbon to the EU, up from $128 million in 2016, according to data from the International Trade Commission.

The Kentucky Distillers’ Association issued a statement saying such taxes would “harm consumers through higher prices and more limited product availability, and significantly threaten the distilling renaissance that is creating industry jobs and generating billions in capital investment.”

By law, bourbon is an American product. Whiskey, to be called bourbon, must be made in the United States. It also must contain at least 51 percent corn and must be aged in new American white oak barrels, among some other rules. Tennessee Whiskey, powered by the huge Jack Daniel’s brand, is basically bourbon yet has its own set of esoteric directives.

Several North Carolina distilleries are now producing some fine bourbon, including Southern Grace in Mt. Pleasant, Old Nick Williams is Lewisville, and Doc Porter’s in Charlotte. Many of our state’s distilleries also export their products throughout the world.

In 1964, Congress, through Senate Concurrent Resolution 19, actually designated bourbon as America’s native spirit.

“Our signature industry is rich with 200 years of history and iconic figures,” Joe Fraser, vice president of Operations at Heaven Hill Distilleries in Bardstown said in a statement several years go.

“Thanks to this resolution, no other country can produce a whiskey and call it bourbon. It led to rigorous treaties that protect the integrity of our craft to this day.”

Bill Thomas is proprietor of Jack Rose’s Saloon in Washington, D.C. It’s a landmark whiskey bar, and Thomas knows a thing or two about the brown spirit.

“If distillers decide to increase the price of whiskey and bourbon that is kept domestically, that would be a negative impact for collectors and drinkers,” Thomas, who curates Jack Rose’s whiskey collection of nearly 2,700 bottles, told CNBC.

Within of few blocks of each other in downtown Raleigh, Whiskey Kitchen and Dram & Draught serve up a vast collection of rich and complex whiskey, from all parts of the world. Whiskey bars, for that matter, have become ubiquitous throughout America.

The world, too.

In 2017, China imported $12.8 million worth of U.S. spirits, the CNBC story says. “Nearly $9 million of that total was whiskey, according to figures provided by the Distilled Spirits Council, a trade association representing the liquor industry.”

“Right now, the U.S. exports about $1.5 billion worth of spirits abroad, and many producers in America are pinning their future growth to exports,” Reid Mitenbuler, author of “The Bourbon Empire: The Past and Future of America’s Whiskey,” told CNBC.

Mitenbuler, the story goes on, said many distilleries have invested in expansion projects to boost their supply for lucrative foreign markets. While distilleries plan their operations 20 years out — to account for the time it takes to produce and age their products — Thomas told the news outlet that even a small hiccup in the marketplace will be unpleasant for the industry. Kentucky produces 95 percent of the world’s supply, employs some 17,500 workers, and generates $8.5 billion annually.

The historic Kentucky Bourbon Trail tour set a new record with 888,733 visits in 2016. That broke the previous year’s record by 17 percent, says the Kentucky Distillers Association.

Kentucky is also the home state of Senate Majority Leader Mitch McConnell, who, one would assume, would resist any effort to harm one of America’s fastest-growing industries.

Call Trump, McConnell reportedly told lawmakers. Here’s hoping they do.