The American whiskey industry's current state of unrest

This story was first featured in CNN Business Before the Bell newsletter. If you're not subscribed, you can sign up here. An audio version of the newsletter is also available at the same link.

The whiskey industry, valued at $5.1 billion, is a significant player in the market. Although most US-distilled whiskey is consumed domestically, approximately $1.3 billion worth was exported last year, representing 62% of all American spirits exports.

The situation could soon undergo a significant transformation as the European Union, which serves as the largest export market for American whiskey, plans to implement a 50% tariff on imports of this esteemed beverage in the coming year. This potential move has garnered concern from advocates in the spirit industry, who argue that it would severely impact a thriving sector of the US economy. At present, the United States boasts an impressive 2,600 whiskey distilleries, a considerable increase from the mere 35 establishments that existed twenty years ago.

The EU is imposing a retaliatory package of tariffs on US goods, including a tax on American whiskey, as part of a dispute over steel and aluminum. This is not the first time US whiskey has faced this type of retribution, as between June 2018 and December 2021, a 25% tax on the spirit resulted in an 18% decline in American whiskey exports.

Following the suspension of tariffs, the industry has experienced a remarkable resurgence. In the first half of 2023, American whiskey exports to the EU saw a staggering increase of 118% compared to the same period in 2022.

Recently, a high-ranking European Commission official expressed the EU's objective to resolve the steel and aluminum dispute by the end of this year. However, advocates of the US whiskey industry are growing concerned that time is running out to discover a solution that can prevent significant harm from occurring.

Before the Bell spoke with Chris Swonger, the president and CEO of the Distilled Spirits Council of the United States, about what comes next.

(This interview has been edited for length and clarity.)

Prior to the opening bell, what led to the implementation of these tariffs?

Chris Swonger explains that during the tenure of President Donald Trump, there was a noteworthy emphasis on various trade matters globally, including those involving the European Union. Among the key concerns in the realm of trade were the disputes surrounding steel and aluminum.

In June 2018, the Europeans retaliated against the president's stance on steel and aluminum by imposing a 25% tariff on American whiskey, among other products. The industry was deeply concerned as this trade dispute did not directly involve our sector. Negotiations continued until 2021, when the tariffs on American whiskey were temporarily lifted, providing a sense of relief.

The suspension occurred because the US and the EU agreed to work towards resolving the steel and aluminum case. However, this suspension is set to expire at the end of December 2023. If a resolution is not reached through negotiations before then, the EU will automatically impose a 50% tariff on American whiskey starting from January 1.

The Biden administration's leadership and efforts have led to the suspension of tariffs on all American whiskey and distilled spirits products. However, we are understandably concerned as a 50% tariff on American whiskey would have a catastrophic impact on our exports. Are there any updates on the progress made?

President Joe Biden and EU Commission President Ursula von der Leyen convened on October 20, raising our expectations for a potential declaration regarding the extension or removal of tariffs. Unfortunately, no such announcement was made, resulting in our disappointment.

However, we maintain a cautious optimism as the Biden administration remains fully cognizant of this matter. In fact, we have engaged in a series of meetings with our European counterparts. Nevertheless, there is a sense of urgency as time is running out, with less than two months remaining.

We absolutely do not want these tariffs to continue. The imposition of tariffs had a significant negative effect on the exports of American whiskey, resulting in job losses and hindering economic growth. However, since the suspension of these tariffs, American whiskey exports have rebounded beyond pre-pandemic levels.

It's important to understand that negotiations between governments in complex trade disputes rarely happen quickly. It is a part of the nature of such negotiations. We simply hope that a resolution is reached within the next 45 days, as companies need to make contingency plans accordingly.

What would be the impact of this tariff on whiskey makers? Can you measure it?

The European Union (EU) is the most significant market for American exports. With the previous 25% tariff, which is half of what the upcoming tariff will be, exports declined by 20%. This resulted in a drop from $550 million to $440 million between 2018 and 2021. If that decline were to double, it would have a significant effect. Although the market has recovered and exports have returned to their previous levels, the imposition of a 50% tariff would lead to a drastic outcome.

Gina Raimondo seeks better ties with China amid tensions

Ahead of crucial meetings scheduled for this week between the United States and China, Commerce Secretary of the United States, Gina Raimondo, categorically denied the possibility of a military confrontation between the two nations concerning the issue of Taiwan.

Both the United States and China, according to Raimondo, express a desire to stabilize their relationship. In an interview with CNN's Christiane Amanpour, Raimondo emphasized that the world expects responsible management of this relationship from both countries. Raimondo also acknowledged the existence of a significant competition with China, aligning with President Joe Biden's stance on preferring competition over hostility and conflict.

Furthermore, Raimondo stated that she has firmly informed China that there can be no negotiations when it comes to matters concerning national security, especially in relation to semiconductor chips used in the production of advanced weaponry.

Recently, the Commerce Department introduced new regulations which restrict the types of semiconductors that American companies can sell to China. These rules further enhance a previously implemented set of export controls starting from October 2022.

Read more here.

More than 1,600 Jewish Harvard alumni threaten to withdraw donations over antisemitism concerns

Harvard University is facing backlash from over 1,600 alumni who have pledged to withhold donations until concrete action is taken to address antisemitism on campus. This comes as part of a wider trend of colleges grappling with hate speech issues following the Israel-Hamas conflict. Notable alumni such as Bill Ackman, founder of Pershing Square, and Leslie Wexner, former CEO of Victoria's Secret, have already warned of a potential exodus of donors unless Harvard tackles the problem. However, it is now the largest group of alumni, many of whom are not billionaires, who are joining in this threat to withdraw their support.

Members of the Harvard College Jewish Alumni Association (HCJAA) expressed their surprise and disappointment that they had to defend the idea that acts of terrorism against innocent civilians should be wholeheartedly condemned. They also expressed their disbelief that they had to advocate for acknowledgement of their own humanity.

Responding to the ongoing tensions, Harvard President Claudine Gay reassured the broader Harvard community that the university vehemently opposes any form of hatred and is fully dedicated to addressing it. In her letter, she made clear that antisemitism has no place at Harvard, echoing previous statements made by herself and other Harvard leaders.

Philanthropy is the primary source of revenue for Harvard, contributing 45% to the university's $5.8 billion income last year. It also accounted for 9% of the university's operating budget and played a significant role in the accumulation of its $51 billion endowment over several decades.

According to the Council for Advancement and Support of Education (CASE), small donations from alumni are increasingly becoming a crucial funding source for higher education. In 2022, approximately 95% of donations received by universities were smaller than $5,000.