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US whiskey makers about to get soaked by higher tariffs

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President Trump’s lingering trade wars are about to soak American whiskey makers even as the rest of the US booze industry celebrates a recent lifting of tariffs on wine, vodka and rum.

Major US whiskey brands — from Woodford Reserve to Jim Beam and Maker’s Mark — have been on the rocks since 2018 over massive 25 percent tariffs imposed on their sales to Europe and the United Kingdom — thanks to a Trump-era war on steel and aluminum imports.

Now, even as the Biden administration works to rebuild US trade relations with Europe and the UK, tariffs on US whiskeys are poised to double on June 1 to 50 percent. Distillers say their sales to Europe, a key market for whiskey, will be put on ice indefinitely if that happens.

A 50 percent tariff would make us “so uncompetitive with a $30 bottle in the US costing 60 euros, that I won’t be able to ship product to Europe anymore,” Michael Langan, general manager of Yellow Rose Distilling of Houston, told The Post.

Yellow Rose’s shipments to Europe fell by fivefold to just 1,000 cases last year as a result of the tariffs, Langan said. If the 50 percent tariffs kick in, his US exports to Europe will fall to zero, he said, and bouncing back will be tough.

“American whiskey is losing market share and shelf space in Europe to competitors from Japan and Asia who are taking our place,” Langan lamented.

US whiskey exports to Europe were on the rise before the tariffs went into effect, up 28 percent for the first six months of 2018, according to the Distilled Spirits Council of the United States. Since then, however, US whiskey exports have fallen by 37 percent to Europe and 53 percent to the UK, the trade group said.

Among those suffering are Brown-Forman, the maker of Jack Daniel’s, which has been absorbing much of the added costs in an effort to not lose market share — suffering profit margin declines in the process.

But even a company like Brown-Forman, which also makes Woodford Reserve and Finlandia vodka, finds the impending 50 percent tariff hard to swallow.

“At a tariff rate of 25 percent, we decided to shield our European customers … whenever possible,” Chief Executive Lawson Whiting told Politico on March 11. “Everyone can imagine that, at a rate of 50 percent, suddenly that shielding becomes much more difficult.”

Brown-Forman is headquartered in Kentucky, the birthplace of bourbon, a type of whiskey that relies heavily on corn for its distinctive sweet flavor. Kentucky is also the home state of noted Trump ally Sen. Mitch McConnell, which is a big reason the whiskey industry was targeted by European trade representatives in the first place, experts said.

Tariffs on US whiskeys are poised to double on June 1 to 50 percent. Distillers say their sales to Europe will be put on ice indefinitely if that happens.

“The Trump administration took a very aggressive posture with the EU and as a result that contributed to the EU being very targeted at the time on where to apply the pressure points,” Chris Swonger, chief executive of the Distilled Spirits Council told The Post. “There’s a lot of whiskey made in Kentucky.”

It’s not just Kentucky that’s suffering, however. There are 37 states that export whiskey overseas and distillers from Virginia to New York say they are feeling the pain.

Cleveland Whiskey has already thrown in the towel on exporting to Europe as a result of the tariffs. “No one wanted to put product on a boat that they’d have to pay a lot more for when the product arrived,” explained Tom Lix, chief executive of the Ohio distillery, which derived 20 percent of its revenues from exports in 2017.

Exporting whiskey had also been the fastest growing segment of New York Distilling Co.’s business in hipster Williamsburg, Brooklyn, before the tariffs, accounting for 15 percent of sales in 2018, owner Tom Potter told The Post. The tariffs stopped that growth in its tracks and exports now account for just 5 percent of overall sales, Potter said.

“We thought it could eventually reach 50 percent of our sales,” said Potter, whose company makes rye whiskeys with names like Mister Katz’s and Ragtime Rye. “We don’t know if we can count on exports helping our company again.”

Catoctin Creek's distillery and tasting room.
Catoctin Creek’s distillery and tasting room.
The Washington Post via Getty Im

The tariffs have also poured cold water on exports at Catoctin Creek Distilling, a Purcellville, Va., distillery whose internationally recognized hootch is sold at Manhattan’s popular Astor Wines & Spirits.

Catoctin Creek’s whiskeys currently generate about $10,000 in sales from Europe versus several million in sales prior to the tariffs. “We had predicted that our overseas sales would double in 2018 to 22 percent,” Scott Harris, Catoctin Creek’s founder, told The Post. “But now it’s about half a percent.”

The Biden administration reached a truce in Trump’s trade war over aircraft subsidies earlier this month, resulting in a four-month freeze of tariffs that had been hammering a wide swath of US booze buyers and sellers — including a 25 percent tax by Europe on American rum, brandy and vodka and a 25 percent tax by the US on wines imported from the UK, Spain, Germany and France.

US Trade Representative Katherine Tai
US Trade Representative Katherine Tai
Bloomberg via Getty Images

And the president’s newly confirmed Trade Representative, Katherine Tai, is now offering the whiskey industry hope, including a March 22 discussion with her EU and UK counterparts over “global steel and aluminum overcapacity,” the trade office said.

But the industries hurt by the on-going steel and aluminum trade war — a group that also includes tobacco sellers and Harley-Davidson motorbikes — continue to be slammed as Biden faces pressure from steelmakers and their unions to maintain the steel tariffs.

Harris of Catoctin Creek popped a bottle of champagne and posted on Twitter when the aircraft tariff truce broke on March 5, because he initially thought it would help the whiskey industry, he said.

“But then my wife sent me a private message telling me the reprieve wasn’t for us and I had to retract our congratulations that were going on out social media,” he said. “We felt unloved.”

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Tesla more than doubles Q1 sales, delivers 185,000 vehicles

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Tesla says it delivered nearly 185,000 electric vehicles in the first quarter despite a shortage of computer chips that has hit the global auto industry.

The number was more than double the deliveries for the same period last year. And it beat Wall Street estimates of 168,000 for January through March. The company says in a statement that the Model Y small SUV in China has been well received.

Tesla lists no production figures for its older models, the S sedan and X SUV, during the quarter, but it delivered just over 2,000 of them. It says new equipment has been installed at the Fremont, California, factory and production of new versions is in the early stages.

The strong sales are a sign that demand for the company’s relatively expensive vehicles remains strong despite the pandemic. Analysts polled by data provider FactSet estimate that the average selling price of a Tesla is $49,100.

Shares of Tesla are down more than 9 percent so far this year as some of the shine wore off electric vehicle and tech stocks, which had experienced a big runup last year. The stock closed Thursday down just under 1 percent at $661.75. Markets are closed for the Good Friday holiday.

Tesla Model 3s (seen here) and its Model Y accounted for nearly all of Tesla's first-quarter sales.
Tesla Model 3s (seen here) and its Model Y accounted for nearly all of Tesla’s first-quarter sales.
Xinhua News Agency via Getty Images

Tesla sold just under 500,000 vehicles last year, barely missing a target set by CEO Elon Musk. The company hasn’t given much guidance for this year’s sales figures.

Wedbush analyst Dan Ives called the first-quarter numbers a “jaw dropper,” and a huge home run in the eyes of bullish investors. “We believe China and Europe were particularly robust this quarter as the trajectory now puts Musk & Co. to exceed 850k for the year which is well ahead of whisper expectations,” he wrote Friday.

The Model 3 small car and the Model Y accounted for nearly all of the Palo Alto, California, company’s first-quarter sales. Tesla said it sold 182,780 of both models combined.

Ives wrote that analysts expected more than 12,000 sales of Models S and X, with the miss driven by the chip shortage.

The strong sales came even though the company shut down much of its Fremont production for several weeks in late February and early March. It did not say why, but it’s likely that the company ran short of computer chips.

President Joe Biden’s announcement this week of $174 billion in spending on electric vehicle incentives and charging stations, and rising global demand for electric vehicles should shift sentiment toward Tesla stock, Ives wrote.

“It’s been a brutal sell-off for Tesla and EVs, but we believe that will now be in the rearview mirror,” he wrote.

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55 firms paid no federal income tax last year, report finds

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Dozens of America’s biggest companies paid no federal income taxes last year thanks to a range of tax breaks — including some brand-new ones, a new report says.

The 55 corporations avoided a total of $8.5 billion in taxes on more than $40 billion in pre-tax profits in their most recent fiscal year, according to the Friday report from the Institute on Taxation and Economic Policy.

In fact, 52 of those firms — including household names such as Nike, FedEx and Dish Network — ended up pocketing federal tax rebates worth a collective $3.5 billion, the left-leaning think tank’s analysis found.

And 26 of them haven’t paid a penny in federal income tax in the three years since the Tax Cuts and Jobs Act reform bill was signed into law in 2017, the report says. That group includes shipping giant FedEx and power company Duke Energy, which reported nearly $15 billion in pre-tax income for those three years, according to the findings.

Nike sneakers
Nike is among dozens of major corporations reported to be paying little to no federal income taxes.
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“Duke Energy fully complies with federal and state tax laws as part of our efforts to make investments that will benefit our customers and communities,” company spokesperson Catherine Butler said, adding that Duke paid more than $2 billion in annual state and local taxes in 2020.

Major companies have used loopholes in federal tax law to help their bottom line for decades, the think tank’s researchers note. But they got a fresh boon from the CARES Act, the $2.2 trillion stimulus bill that aimed to help businesses weather the COVID-19 pandemic.

Big firms were able to take advantage of a provision in the bill to use losses they racked up in 2018 or 2019 to offset profits from previous years, which slashed some of their 2020 tax bills to less than zero, according to the report. That measure accounted for at least $500 million of the 55 giants’ tax breaks, the report says.

FedEx stood by the CARES Act tax breaks, saying the law helped it and other companies “navigate a rapidly changing economy and marketplace while continuing to invest in capital, hire team members, and fund employee pension plans.”

FedEx truck
FedEx is said to be among major firms pocketing federal tax rebates while avoiding federal income taxes.
Alamy Stock Photo

But many companies also used more established methods for giving themselves tax discounts.

Those include write-offs for paying executives in stock, which were used by more than a dozen companies, while at least half a dozen took federal research and experimentation credits, the report says.

The list included some companies hit hard by the pandemic, including crafts retailer Michaels, as well as companies that thrived despite the lockdowns, like Salesforce.com, the cloud computing company that announced record 2020 earnings in February.

Salesforce logo
Salesforce is reported to be among thriving firms able to take advantage of numerous write-offs.
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By reining in tax breaks like those, “or by re-introducing some form of a ‘minimum tax’ requiring profitable companies to pay at least some tax in any profitable year, Congress and President Biden could take a major step toward a fairer and more sustainable tax system,” authors Matthew Gardner and Steve Wamhoff wrote in the report.

Salesforce, Michaels, Nike and Dish Network did not immediately respond to requests for comment.

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China admonishes H&M over ‘problematic’ map on website

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Swedish retailer H&M continues to clash with Beijing, this time over how it has portrayed the region geographically.

Chinese officials admonished H&M Friday over a “problematic” map on the company’s website in the latest sign of escalating tensions after the Swedish retailer criticized China’s controversial cotton-picking region.

Shanghai government regulators summoned H&M managers to a meeting after internet users complained about the map, officials said on social media.

Chinese officials did not provide any detail about the alleged offense, which they said H&M managers quickly corrected.

But H&M got in trouble with China in 2018 for listing Taiwan as a country on the Taiwanese version of its website. China claims the democratic island country is part of its territory.

H&M was told to “bolster its awareness of the national territory, and really ensure the standardized use of the Chinese map,” the Cyberspace Administration of China’s Shanghai arm said in a post on the WeChat social network, according to The Wall Street Journal.

H&M did not immediately respond to a request for comment Friday.

The map flap is just the latest headache H&M has faced in China, the fast-fashion retailer’s top clothing supplier and its fourth-largest market by sales.

The company was hit with boycott threats last week and had its products pulled from Chinese e-commerce platforms over a statement it made last year saying it does not source cotton from the Xinjiang region, where Beijing has been accused of forced labor practices against Uyghur Muslims.

H&M tried to tamp down the backlash Wednesday with a new statement saying it’s “dedicated to regaining the trust and confidence” of its customers, colleagues and business partners in China, where its store locations were reportedly scrubbed from digital maps last week.

The company said it wants to be “a responsible buyer, in China and elsewhere,” but did not mention Xinjiang specifically.

With Post wires

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