Bourbon Tariffs a Blow to Bourgeoning Craft Alcohol Businesses

Distilling spirits is in Paul Hletko’s DNA.

“Prior to World War II, my grandfather’s family owned what is now a major brewery in the Czech Republic,” he told VOA.

But his grandfather’s Jewish family lost more than a brewery when the Nazis took over Europe during the war.

“The whole family got taken to the camps where they were all murdered, except my grandfather. He spent the rest of his life trying to get the brewery back and never did. And when he died, it struck me that if I didn’t do something to reconnect and reengage with the family legacy, it would be gone forever,” Hletko said.

Honoring his family legacy forced Hletko away from a law career to launch Few Spirits in 2008… an homage to his ancestors, but this time around, beer isn’t the spirit of choice.

“Whiskey is what beer wants to be when it grows up,” Hletko said from his office in an old converted automotive “chop shop” in Evanston, Illinois, that is now the world headquarters of Few Spirits. Hletko’s brand of bourbon, rye and gin is now in demand at home and abroad.

“We’re sold across 35 countries in about 45 states. We’re the No. 1 craft spirit in the United Kingdom,” he added.

But the real prize for Hletko is China.

“U.S. spirit exports to China have gone up something like 2,000 percent. That’s a hell of a number,” he said.

A number that may sharply decline as another war – this time a trade war – could once again derail the Hletko family business. 

As the trade dispute escalates between the United States and global trading partners, American bourbon whiskey is among U.S. exports in the crosshairs. It will soon be subject to a tariff imposed by a growing number of countries as a retaliatory measure for U.S. tariffs on steel and aluminum.

“The proposed tariffs are 25 percent,” Hletko tells VOA, “which would be a dramatic increase and make our products, which are already relatively expensive, unnecessarily more expensive. Basic economics dictate that the higher the price of something the less it sells, so simply adding the tariff on will reduce our sales by a pretty material amount.”

The Distilled Spirits Council said U.S. exports have surged from $575 million in 1997 to $1.64 billion in 2017. But imposing new tariffs this year could significantly impact those figures

“It’s the iconic American brands they are going after… it’s because bourbon is America. That’s a symbol in America,” says Phil Flynn, a senior market analyst with the PRICE Futures Group and a FOX Business Network contributor. But Flynn downplays the impact the tariffs will have on bourbon sales overseas, particularly in China.

“It’s not like they are banning sales of these things,” he explains. “Its just going to be a little bit more expensive. Generally speaking, if you have a good quality product, and it comes from overseas, you are probably going to pay a little more.”

But Hletko said it impacts his bottom line, and would significantly cut into his modest annual sales to China.

“We are current estimating that our $150,000 would likely go down somewhere around $5k ($5,000) to $10k ($10,000), virtually eliminating it,” he said.

And with it, other American jobs.

“Making the grain, moving the grain, doing the boxes… everybody is benefiting from U.S. exports to China and I, for one, would like to see that continue to grow,” Hletko said.

Without that growth, and now new tariffs on his product coming from the European Union and Mexico, what is now a potential loss of hundreds of thousands of dollars for Few Spirits this year could translate into millions of dollars of lost future profit if foreign consumers turn away from a product they view as too costly.

“We’re simply pawns in a political game, which is unfortunate,” he said.

A game that Hletko says crowns no real winners.

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