Retaliatory tariffs on US whiskey upend producer’s international expansion plans

Global Business

Retaliatory tariffs on US whiskey upend producer's international expansion plans

In response to U.S. duties on Chinese goods, China and the European Union recently retaliated with their own tariffs, including a 25 percent tariff on American whiskey.

U.S. producers are feeling the squeeze and some local distilleries are struggling to make ends meet.

CGTN’s Mark Niu reports from Seattle.

At the OOLA distillery, founder Kirby Kallas-Lewis experiments with ingredients grown by his own hands.

“Lemon verbena that we use for our citrus,” said Kallas-Lewis showing off his crop. “Put it right in here. I’m going to add this to what we’ve infused before and then fill it with crystal clear vodka, just like water. And in a matter of days, this is what you get.”

Kallas-Lewis often resembles a mad scientist, constantly searching for the perfect infusion for vodka, whiskey and gin.

When he heard that since 2001 American spirits exported to China grew by 1,200 percent, he came up with a strategy to send his products abroad.

“Build our capacity and then focus on the EU and China at the same time. And then, boom,” he said. “The tariffs hit and changed everything.”

OOLA spent a year and a half getting a column still custom built and installed at a cost of more than $200,000. The idea was for the device to help the company speed up production and target the international market. But when the tariffs hit, the idea was put on hold.

The column still has yet to be used. Kallas-Lewis also scrapped plans to double his staff.

“It was like a house of cards, every market that we would maybe reach out to all fell so fast,” said Kallas-Lewis. “But also, they chose products that their consumers would have another alternative. They didn’t want to hurt their own people. And I went ‘ouch,’ they are right. Of course, they’ll just buy another whiskey. And this is a trend we’re riding and you want that wave to keep going and be part of it.”

A less profitable international market means the big American whiskey producers may flood the U.S. market with their extra supply.

Nearby restaurant, Marjorie, which serves OOLA’s spirits, says it’s important to support small business distillers as they fight to stay afloat in a turbulent trade war.

“I could simply say I think it’s ridiculous. I think we have created a market that’s very international. I think a lot of businesses really rely on exporting to an international market,” said Donna Moodie, owner of Marjorie Restaurant.

While this experience has left Kallas-Lewis with a bad taste in his mouth, if tariffs are lifted, he’ll still target international markets.

“Absolutely, but I am going to be so gun shy,” he said. “I’m going to dip my toe into it. Right now, I was ready to go knee deep.”

Having spent so much time dealing with volatile market conditions, Kallas-Lewis just wants to focus on what gives his business an edge — delivering innovative sensations consumers have never experienced before.

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