Scotch whisky suffers £500m loss after US tariffs

2nd February, 2021 by Melita Kiely

US tariffs imposed on single malt Scotch in October 2019 have now cost the industry more than £500 million (US$682m) in exports and are inflicting ‘long-term harm’ on the sector, a leading trade body has warned.

Scotch whisky barrels

The Scotch whisky sector has suffered more than £500,000 in losses due to US tariffs

Since single malts were subjected to the tariffs, exports of Scotch whisky to the US have plummeted by 35%. The tariffs were introduced due to an ongoing dispute between the US and the EU regarding plane manufacturers Airbus and Boeing.

The Scotch Whisky Association (SWA) warned the situation was becoming ‘unsustainable’ and the market share being lost because of tariffs could take years to rebuild.

Last month, the US and UK governments failed to reach a ‘mini-deal’ that would have removed tariffs on Scotch whisky and other products. Single malt Irish whiskey was also in the firing line when the tariffs on Scotch were brought in, as were liqueurs from the EU.

Cognac and brandies from France and Germany were added to the growing list of products facing a 25% tariff last month.

The SWA is urging the UK government to call for the immediate suspension of tariffs on unrelated sectors and to help find a resolution to the aerospace dispute, by addressing UK violations of World Trade Organization (WTO) rules on subsidies.

The SWA encouraged the UK government to agree a future regime of support to aerospace with the US, as soon as the new US Trade Representative takes office, that is WTO compliant.

‘Terrible losses’

Karen Betts

Karen Betts, chief executive of the SWA

Karen Betts, chief executive of the SWA, said: “It’s very hard for Scotch whisky producers to understand why the UK government is so unwilling to address the UK violations of WTO rules on aerospace subsidies at the root of the tariffs.

“Distillers are suffering terrible losses and still the government, after 16 years of unsuccessful litigation, is unprepared to take the necessary steps to ensure subsidies comply with the UK’s international obligations.

“The UK government must now act urgently and call for the immediate suspension of all tariffs on unrelated sectors and, at the same time, redouble efforts with the new US administration to resolve the aerospace dispute and lift tariffs permanently.

“The government must also offer some support to distillers, who are shouldering tariff losses alongside dealing with unprecedentedly difficult trading conditions as a result of Brexit and global restrictions to curb Covid-19 transmission.

“As part of this, the chancellor must deliver a package of support for the industry, including a cut to spirits duty in next month’s budget.”

The SWA is also asking for a ‘sustained push’ to cut the basic customs duty in India, which is currently 150%.

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