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Single malt Scotch exports to US could drop 20% after tariffs

The 25% tariff on single malt Scotch imports to the US, effective from today, will be “particularly damaging” for smaller producers and will “diminish” consumer choice, the Scotch Whisky Association (SWA) has warned.

The SWA’s Karen Betts says that smaller producers will be hit the hardest by the 25% tariffs on single malt

On 2 October, the US government revealed its intentions to impose a 25% import tariff on EU goods, including single malt Scotch whisky, single malt whiskey from Northern Ireland, liqueurs and cordials from Germany, Italy, Spain, Ireland and the UK and wine.

The tariffs, which were formally given the go ahead by the World Trade Organization (WTO) earlier this week, came into force today (18 October).

The US has been embroiled in an ongoing spat with the WTO over alleged illegal subsidies for plane manufacturers Airbus and Boeing. The tariff has been launched in retaliation against EU subsidies given to aerospace company Airbus.

According to the SWA’s chief executive Karen Betts, the move means that Scotch “is now paying for over 60% of the UK’s tariff bill for the subsidies it provided to Airbus, eight times more than the next most valuable UK product on the tariff list”.

She warned that smaller producers will be hit the hardest by the tariffs.

The EU and US first reached an agreement for tariff-free trade in distilled spirits in 1994.

Betts said: “This move undermines decades of hard work and investment, which has seen Scotch whisky sales boom in the US. It will impact both our industry and its supply chain.”

She added that the tariff on single malts “will see exports to the US drop by as much as 20% in the next 12 months, as Scotch whisky will become less competitive in the US market”.

Scotch whisky firms “would start to lose market share” and eventually “jobs could be at risk”, Betts warned.

“In Scotland and throughout our UK supply chain, we expect to see a dropping-off in investment and productivity,” she continued.

‘Weather the storm’

The new US tariffs are the latest blow to hit the industry since the EU’s 25% retaliatory tariff on US products, including American whiskey, was imposed in July 2018, resulting in a 21% sales decrease.

“We expect the damage to our industry to mirror the damage caused to exports of American whiskies to Europe since the EU imposed a 25% tariff in July 2018,” said Betts.

“Alongside American whiskey companies, we have called on the UK, US and EU governments for many months now to find a negotiated solution to the trade disputes that have given rise to these tit-for-tat tariffs, and to ensure that duty-free trade can resume between the UK and the US to the benefit of whisky producers, their employees, the communities we work in, and consumers everywhere.

“We now need the UK and Scottish governments to work together to ensure distillers can weather the storm.”

Betts urges that the two governments could consider “reducing the UK tax burden on Scotch whisky in the autumn Budget”, which will “provide an important lifeline while efforts continue to remove the tariffs”.

“Despite multiple pressures on the UK government, including Brexit, this issue must not fade from the minds of ministers,” Betts said.

“Scotch whisky has long been a standout export success. This is now at risk if government strategy does not urgently use all the powers at its disposal to remove these damaging tariffs.”

Next year, the WTO will decide what tariffs the EU can impose in retaliation to US state aid given to American company Boeing.

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