Tariffs cause growth slowdown in US Scotch exports
Total Scotch whisky exports grew 4.4% in 2019, but exports to the US fell by 25% during the fourth quarter following the implementation of tariffs on single malts.
According to HMRC figures released by the Scotch Whisky Association (SWA), Scotch exports reached £4.91 billion (US$6.3bn) in 2019, and the volume of Scotch exports increased by 2.4% to 1.31bn 700ml bottles. The SWA said the growth was boosted by Asia and Africa, which grew by value by 9.8% and 11.3% respectively.
The US, which is the most valuable market for Scotch, grew 2.7% by value to £1.07bn (US$1.38bn) through 2019, while export volume dropped 7% to 127 million 700ml bottles for the period. The US became the first billion-pound export market for Scotch whisky in 2018.
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 came into force on 18 October.
The US has been embroiled in an ongoing spat with the World Trade Organization over illegal subsidies for plane manufacturers Airbus and Boeing. The tariff has been launched in retaliation against EU subsidies given to aerospace company Airbus.
Last month, the SWA joined calls for an end to “punitive tariffs” that could cost the industry £100m (US$130m) in exports this year.
The SWA said the “the outlook for the industry remains uncertain, particularly given that this tariff could rise”.
In August 2019, the SWA warned that exports in 2019 “had been affected by changing trade conditions in key export markets, and did not reflect ‘steady-state’ trade for the Scotch whisky sector”.
The trade body added that “this continues to be the case, with significant pre-shipping ahead of Brexit ‘no-deal’ deadlines in March and October 2019, and ahead of the imposition of a tariff on exports to the US on 18 October”.
Karen Betts, chief executive of SWA, called the tariffs “very concerning”.
“The 25% fall in exports to the US in the fourth quarter of 2019, immediately following the implementation of tariffs, is stark,” Betts said.
She warned that the tariffs “are hitting producers hard, particularly small distillers”.
Betts continued: “Some are now asking themselves how they can continue exporting to the US, whether they can build up alternative markets, which is not something that can be done quickly, and if not how their businesses will cope.
“We are continuing to press the UK government to put in place a package of support for distillers to help mitigate the impact of tariffs, including a cut in excise duty in next month’s budget which would allow distillers to re-invest in the UK market while sales are under pressure in the US.”
Rural economy secretary for the Scottish government, Fergus Ewing, added: “The Scotch whisky industry is a major employer in Scotland and we will continue to do everything we can to protect it.
“This includes keeping pressure on the US government and UK ministers to end the damaging increase in tariffs on exports of single malt Scotch whisky and Scotch whisky liqueurs to the US.”