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US to impose 25% tariff on single malt Scotch

The US is set to enforce US$7.5 billion worth of tariffs on exports from the EU, including single malt Scotch whisky and liqueurs, over an ongoing dispute with the World Trade Organization (WTO).

The US tariff on EU goods will “undoubtedly damage the Scotch whisky sector”

Yesterday (2 October), the US government revealed its intentions to impose a 25% import tariff on EU goods, including single malt Scotch whisky, single malt Irish whiskey, liqueurs, cordials and wine on 18 October 2019. The US has also imposed a 10% tariff on aircrafts.

The US said it had the authority to increase the tariffs “at any time” or change the products affected.

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

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

Trade group the Distilled Spirits Council said these new tariffs will have “numerous unintended negative consequences” on jobs and consumers in the US, as well as US firms operating in the EU wine and spirits industry.

Analysis from the trade association shows that the US tariffs on Scotch, liqueurs and cordials, and wine could impact almost US$3.4bn in imports. It could also result in the loss of around 13,000 jobs in the country, including bartenders and farmers.

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.

US president Donald Trump locked the US in various trade wars in 2018 after imposing 25% and 10% tariffs on steel and aluminium imports respectively, effective from 1 June 2018.

Industry response

Scotch Whisky Association’s chief executive Karen Betts said: “Despite the fact that this dispute is about aircraft subsidies, our sector has been hit hard, with single malt Scotch whisky representing over half of the total value of UK products on the US Government tariff list (amounting to over US$460 million).

Betts added that the tariff “will undoubtedly damage the Scotch whisky sector”.

She said: “The US is our largest and most valuable single market, and over £1 billion of Scotch whisky was exported there last year. The tariff will put our competitiveness and Scotch whisky’s market share at risk.”

Betts also expressed concern that the tariff will “disproportionately impact smaller producers”.

She continued: “We expect to see a negative impact on investment and job creation in Scotland, and longer-term impacts on productivity and growth across the industry and our supply chain. We believe the tariff will also have a cumulative impact on consumer choice.”

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

“The Scotch whisky industry has consistently argued against the imposition of tariffs in our sector,” said Betts. “For the last 25 years, trade in spirits between Europe and the US has been tariff-free.

“In that time, exports of Scotch whisky to the US and of American whiskey to the UK and Europe have grown significantly, benefitting communities on both sides of the Atlantic, boosting investment, employment and prosperity for all.”

Chris Swonger, president and CEO of Distilled Spirits Council, called the move a “devastating blow to the US spirits industry”.

He said: “While we recognise the US and EU are trying to solve long-standing trade disputes, distillers on both sides of the Atlantic have become collateral damage in matters that are completely unrelated to our industry.

“As the important holiday season approaches, we urgently call upon the US and the EU governments to get back to the negotiating table and return to tariff-free trade with our largest export market.”

‘Particularly irritating’

Ulrich Adam, director general of Spirits Europe, branded the decision “unacceptable”, claiming the spirits industry should not have to foot the bill over a row “essentially about civil aircraft subsidies”.

He said: “It is particularly irritating to see that unrelated sectors like ours will be hit by an extra 25% tariffs when the sector at stake will only be imposed a 10% rate.

“Most importantly, for the last 18 months, we have recurrently underlined that imposing tariffs on spirits harms consumers and producers on both sides of the Atlantic alike.

“The success of the spirits sector in the United States and in the European Union is mutually reinforcing. Indeed, many of our European producers operate distilleries and production sites in the US, while many American producers also own distilleries in Europe.

“We call on the president-elect of the European Commission and the commissioner designate for trade to find a negotiated solution with their American counterparts as soon as possible and to de-escalate the current situation.”

The American Craft Spirits Association (ACSA) is also urging the US government to “work collaboratively with the EU to ensure all American businesses, including craft spirits, prosper”.

The ACSA’s CEO, Margie Lehrman, said: “The threat of additional retaliatory tariffs from the EU on American rum, vodka and brandy imports from the US will further limit our market access, directly affecting not just our distillers and their families – who collectively make up a workforce of more than 20,000 employees across the US.”

Michelle Korsmo, president and CEO, Wine & Spirits Wholesalers of America, said: “These tariffs stand to disrupt consumer-driven, industry-wide growth, and will negatively impact the family-owned businesses who import and distribute the nation’s wine and spirits. When free trade is compromised and business becomes more expensive to conduct, consumers are always left to pay for the damages by way of higher prices.”

Robert M Tobiassen, president of the National Association of Beverage Importers, added: “These tariffs will devastate, perhaps destroy, many small- and medium-sized family businesses importing these products into the United States.”

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