Tariffs could knock £100m off Scotch exports to US

29th January, 2020 by Melita Kiely

The Scotch Whisky Association (SWA) has joined calls for an end to “punitive tariffs” that could cost the industry £100 million (US$130m) in exports this year.

Scotch whisky ice

There have been fresh calls for an end to “punitive tariffs” on Scotch whisky and American whiskey

The chief executives of the SWA and the Distilled Spirits Council of the United States (Discus) are urging the UK and US governments to find a solution to the trade disputes that have put Scotch whisky and American whiskey in the firing line.

In June 2018, a 25% retaliatory tariff was levied on imports of American whiskey to the EU after US president Donald Trump introduced tariffs on European steel and aluminium.

The following year in October 2019, the US slapped a 25% tariff on imports of single malt Scotch whisky to the US over an ongoing quarrel regarding EU and US subsidies to Airbus and Boeing.

Last June, Jack Daniel’s owner Brown-Forman said tariff pressures negatively impacted growth during its 2019 fiscal year.

Karen Betts, chief executive of the SWA, has called for an end to the tariffs.

She said: “Our message is clear. The UK and US governments must return quickly to tariff-free trade.

“The current disputes about steel and aluminium, and aircraft manufacture have nothing to do with us, but the tariffs stemming from them are causing needless damage to our industry on both sides of the Atlantic, and to the livelihoods we support. Constructive negotiations must solve trade disputes, tariffs on whiskies will not.

“Exports each way are markedly down, and if these falls are maintained over the year around £100 million is likely to be lost in Scotch whisky exports.

“Many smaller Scotch whisky companies are now asking themselves how they can continue exporting to the US, whether they can build up alternative markets, and if not how their businesses will cope.

“Until a resolution is found, it is critically important that the UK and Scottish governments act to mitigate the impact of tariffs on Scotch whisky producers, particularly SMEs [small to mid-sized enterprises], which are being disproportionately hit.

A cut to excise duty in the March budget would help businesses strengthen their presence in the UK while exports to the US are under such pressure.”

american whiskey

American whiskey has also been caught in the cross fire as trade wars wage on

Government intervention

Scotland secretary Alister Jack said the UK government has raised the issue of tariffs against single malt Scotch with the US president.

“These tariffs are not in the interests of the UK, EU of US,” Jack said. “The UK government has raised the issue at the highest levels of the US administration, including with the president, and we are working hard to support a negotiated settlement.

“Scotch whisky is a global success story and for the good of the communities and businesses that rely on this iconic industry, we will continue to do everything we can to protect it.”

Prior to the current trade wars, Scotch and American whiskies have experienced tariff-free trading between the UK and US for 25 years.

Since the introduction of zero-tariff trade 25 years ago, Chris Swonger, president and CEO of Discus, said Scotch exports to the US have risen by 270%, while American whiskey exports to the UK increased by 410%.

“That ended in June 2018 when the EU imposed a 25% tariff on American whiskey in response to US actions on steel and alumiumium, which was further compounded by the US introducing a tariff on single malt Scotch whisky, liqueurs and other EU distilled spirits products in connection to an unrelated trade dispute in October 2019,” Swonger said.

“We need to get back to zero-tariff trade, which benefitted distillers on both sides of the Atlantic, so our industries can go back to doing what we do best – distilling amazing whiskies and sharing them with the world.”

Earlier this week, Spirits Europe and the Discus joined forces to demand an “urgent return” to tariff-free transatlantic trade.

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