US and China spark ‘largest trade war’ in history

China has imposed a 25% tariff on American whiskey in response to the US adding tariffs to an extra US$34 billion worth of Chinese products, as “the largest trade war in economic history” gets under way.

China is the latest nation to retaliate against the US’s tariff increases

The US tariffs came into effect on Friday (6 July) prompting the retaliatory response from China. The US and China are the world’s two largest economies.

China has accused the US of “trade bullying” and warned its tariffs could hinder global recovery and affect “more innocent multinational corporations”.

The country first threatened a 25% tariff for 106 US products in April this year.

A spokesperson for China’s Ministry of Commerce said: “This kind of taxation is typical trade bullying, which is seriously jeopardising the global industrial chain and value chain security, hindering the pace of global economic recovery, triggering global market turmoil, and will affect more innocent multinational corporations, general enterprises and ordinary countries.

“Consumers will not only be helpless, but will also harm the interests of American businesses and people.

“The Chinese side promised not to [fire] the first shot, but in order to defend the core interests of the country and the interests of the people, they had to be forced to make the necessary counterattacks.

“China reiterated that we will unswervingly deepen reform, expand opening up, protect entrepreneurship, strengthen property rights protection and create a good business environment for Chinese companies in the world.”

The Distilled Spirits Council condemned the tariffs, arguing the 25% hike could “put the brakes on” American whiskey exports and hinder growth.

Christine LoCascio, senior vice president of international trade, said: “Imposing 25% tariffs on US whiskeys could put the brakes on an American export success story. American spirits exports to China have grown by almost 1,200% from US$959,000 in 2001 to US$12.8 million in 2017.

“We hope the United States and China can soon resolve their differences so that the US whiskey exports to China will no longer be subject to the 25% tariff, which will harm Chinese consumers, its hospitality sector, US whiskey exporters and the US farmers that supply them.”

Ongoing battle

The battle between the US and China is the latest trade war to erupt as a result of tariffs raised by US president Donald Trump.

The EU introduced retaliatory tariffs on €2.8bn worth of US products, including American whiskey, in response to Trump’s tax hikes on imported aluminium and steel (10% and 25% respectively) in June.

As a result, Brown-Forman confirmed prices of its American whiskey and Bourbon brands – which include Jack Daniel’s, Woodford Reserve and Old Forester – would go up by around 10% in EU markets where the company owns distribution.

This percentage increase could be more or less in markets where third parties distribute its whiskey brands.

Canada has also targeted American whiskey with a 10% tax increase in response to the US’s aluminium and steel tariffs.

For an in-depth look at the ongoing trade war, see the July issue of The Spirits Business.