armagnac us tariffs

Armagnac: How US tariff relief poses long-term questions

04 May, 2021

A synchronised sigh of relief was heard right across the Armagnac region last year as the news broke of Donald Trump’s defeat in the US election.

The Trump administration had imposed a 25% tariff on certain European spirits in an escalation of the ongoing Airbus/Boeing trade dispute, which saw many European spirits caught up as collateral damage. The aggressive trade negotiation strategies under Trump are now being replaced by the more pragmatic approach of Joe Biden’s democratic office and therefore armagnac producers with strong ties to the US have good cause for optimism. An initial four-month suspension on mutual tariffs between the EU and US was implemented in March this year and now EU trade commissioner Valdis Dombrovskis has reportedly put forward a proposal to extend this to six months. However, while the uncertainty of EU-US trade relations take the strain, other big players in the east are ready to prey on the wounded.

During a recent online discussion held by Vinexpo New York, Robert Tobiassen, president of the National Association of Beverage Importers in the US, said: “I was surprised it was four months and not six months. Under US trade law you can suspend up to 180 days. June is going to be a really pivotal month this year because that’s when the decisions will have to be made before the tariffs are due to end in early July.” According to the Bureau National Interprofessionnel de l’Armagnac, the US is the second biggest export market for armagnac behind China, and the imposed tariffs from the US sent a wave of fear throughout the French region.

“It was a real hostage-taking situation that we experienced overnight. We had a gun pointed to our head,” says Olivier Goujon, director of the BNIA. “An armagnac that le our cellars at €100 arrived at €125 over there. We were no longer in our market category within the spirits sector, in terms of product positioning.”

Barkley Stuart, executive vice president of federal government affairs for Southern Glazer’s Wine & Spirits, one of the US’ biggest distributors, adds: “I believe the largest impact is in creating uncertainty. After tariffs were imposed we have had to look at our pricing, with a four-month pause pricing will not adjust. Order cycles will be impacted as tariff is imposed when the item arrives in the US. “I think there is reason to view the suspension as positive and encouraging, however, there are no guarantees it will be extended. There is a new trade regime with the new administration. I believe the approach will be to look for a comprehensive negotiated agreement.”

DOUBLE BLOW

Traditionally the US has been one of the biggest export markets for armagnac, alongside China. According to figures provided by the BNIA, the US experienced an 11% drop in volume exports in 2020 while China was down almost 31%.

These figures can largely be attributed to the impact of Covid-19, but for producers who trade with the US, the implementation of the new tariffs on EU spirits at the close of last year was a double blow. Denis Lesgourgues, third-generation family member of Laubade in the Bas Armagnac region, values the US as its number one export market.





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