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Alcoholic beverage analysts and experts are sounding the alarm about new tariffs and the threats of more on the way that could not only drive up your bar tab but cause many brands of alcoholic beverages to disappear in the U.S. and create a huge loss of jobs on both sides of the Atlantic.
TPR’s Jerry Clayton recently spoke with Jon Taylor, professor of political science and chair of the Department of Political Science and Geography at the University of Texas at San Antonio about the possible impacts of tariffs on the alcoholic beverage industry.
This conversation has been edited for length and clarity.
Clayton: It might be good to start with a very simple explanation of how tariffs work, in case there are some people out there who are unclear.
Taylor: Well, basically, it is a tax, or a duty imposed on imported goods. So, say for example, we're importing tequila from Mexico, beer from Canada, Canadian bacon from Canada, or any other product. When it's coming into the U.S., you pay a fee for that. That would be the tariff that's placed on the goods coming from the other country. The idea being that it is attempting to send a message or a signal to the other country that "if you're doing it to us, we're going to do it to you. We don't like the fact that you're doing it to some of our other products, and therefore, we're going to punish you by placing tariffs or, or duties of some sort on your products coming to our country."
Clayton: The most recent tariffs have not included Mexican tequila or Canadian whiskey so far. However, there's quite a bit of liquor, wine and beer that we get from Europe. How is it going to affect products from European countries?
Taylor: Boy, it could skyrocket. If you look at how these tariffs have actually been put in place, the Trump administration used — I got to be perfectly honest by saying this — kind of a squirrely statistical formula to make the argument about what kind of tariffs will be placed on items from other countries — the EU, for example. And ironically, the correlation is directly related to what the trade deficit is with the country in question. And so, if you got a trade deficit where 30% more goods are coming into the U.S. and out, then we're putting a 30% tariff on that country.
We're talking about not just the goods, but the products that go into the development of, say, an Irish whiskey, or a scotch or French wine. There's going to be costs involved with that. I mean, you think, for example, "oh, it's just the hops or the barley. Oh, it's just the grapes." No, it's far from that. It's everything from the glass and the bottles that you use for the various alcoholic products.
It's also, of course, things such as the barrels, the kegs, all of that comes into play. If we want to talk about particular produce, we're talking about barley, malt, wheat, all those will be in play — and even fruits that are involved with certain kinds of distilling as well.
Clayton: Now I know there are people out there who probably think these tariffs are just a swell idea. What is the argument for imposing these tariffs?
Taylor: Their argument is, and we'll use the president's quote, is that ... "it's unfair that the U.S. is suffering from trade deficits with other countries, that we should have reciprocity, that whatever we're taking in, that in turn that they should be paying just as much for whatever they're purchasing from us."
That's not a good way to look at it, because if you think of it this way, it's like, it's like telling me that I'm gonna go somewhere and tell them that I want to purchase a toilet.
And in turn, they turn around and say, "OK, it's gonna cost you this much," and I'm like, "I don't like that. You need to be purchasing this from me," and me as a consumer may say, "OK, you're gonna purchase the old junker in my garage. We're gonna charge the same kind of price."
It's kind of a goofy way of saying it, but the idea is that you're basically punishing trade is what you're doing. The assumption is that somehow, some way, we're gonna even the playing field. To be blunt, we're not going to even the playing field when you do this stuff, because what will happen is that other governments, other countries will impose similar tariffs.
We saw this happen before in 1930. It was called Smoot-Hawley, and it basically pushed what was a deep recession into a depression.
