And so it comes to pass that Scotch whisky, among other European imports, is at the center now of an ongoing trade dispute between the United States and the European Union. The original reasons for said dispute we’ve covered more in detail in the recent past, but the crux of it focuses upon the aerospace industry in the respective global regions. Regardless, now the whisky makers in Scotland are being impacted significantly via a 25% import tariff on their Scotch single malt products to the United States that took effect today.
Most concerned about it, of course, are the members of the Scotch Whisky Association (SWA), the trade group for the whisky industry in Scotland. Here is what SWA chief executive Karen Betts had to say in regards to the fact the tariffs are now in play, with the key takeaway here being exports to the US are expected to drop off by as much as 20% in the coming year, resulting in considerable hardship to the Scotch industry and a rising in prices of Scotch single malts for American consumers:
“A 25% tariff has today been implemented on US imports of Single Malt Scotch Whisky and Liqueurs. This is very bad news for our industry. It means that Scotch Whisky 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. That Single Malts are being targeted is particularly damaging for smaller producers, who stand to be the hardest hit.
“Scotch Whisky has been imported tariff-free to the United States for the last 25 years. 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.
“We estimate that 25% tariff on Single Malt Scotch Whisky 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. In time, consumer choice will diminish and Scotch Whisky companies will start to lose market share. In Scotland and throughout our UK supply chain, we expect to see a dropping-off in investment and productivity. Ultimately, jobs could be at risk.
“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. That tariff has done nothing other than damage an industry very similar to, and closely linked with, our own. 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. We want them to consider a range of support to the industry, including reducing the UK tax burden on Scotch Whisky in the Autumn Budget. This 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. 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.”
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Alongside the SWA a coalition of international beverage alcohol associations, including American Beverage Licensees, American Craft Spirits Association, American Distilled Spirits Association, Bureau National Interprofessionnel du Cognac (BNIC), Distilled Spirits Council of the United States (DISCUS), Drinks Ireland|Irish Whiskey, Drinks Ireland|Spirits, Federación Española de Bebidas Espirituosas, Kentucky Distillers’ Association, National Association of Beverage Importers, spiritsEUROPE, The Wine and Spirit Trade Association, Wine and Spirits Shippers Association and Wines & Spirits Wholesalers of America issued their own joint statement on the tariff situation:
We are united in our opposition to the imposition of tariffs and clear in our view that there are no winners in a trade war. Our 15 international beverage alcohol associations today sent a letter to the U.S. administration and the EU Commission calling for an immediate end to tariffs on distilled spirits and wines and welcoming their statements of their shared intent to reach negotiated solutions to the disputes. Our industries are collateral damage in trade disputes that have nothing to do with the beverage alcohol sector. This new round of tariffs will further damage a transatlantic industry that has already been negatively impacted by the EU’s retaliatory tariff on American Whiskey.
American Whiskey exports to the EU have faced a 25% tariff since June 2018 and, beginning today, certain EU spirits and wines imported into the U.S. now face a 25% tariff. Since the EU’s imposition of tariffs, American Whiskey exports to the EU have decreased nearly 21%. These tariffs are greatly harming the industry’s competitiveness, long-standing partnerships, workers and our farm suppliers. The negative impacts will be compounded by these new tariffs on EU products entering the U.S. Tariffs are taxes on U.S. consumers who create demand for these products in the U.S. marketplace.
Importantly, the U.S. and EU wines and spirits sectors are interconnected, with companies owning a range of European and American distinctive spirits and wines in their brand portfolios. As a result, these new U.S. tariffs on EU spirits and wines could result in the loss of 8,000 good-paying jobs across the U.S. beverage alcohol sector, from importers, distributors, wholesalers, to the hospitality sector.
Prior to these recent trade disputes, U.S. and EU spirits exporters enjoyed more than two decades of tariff-free access to each other’s markets, and U.S. and EU wine exporters have faced very low tariffs. This open access to each other’s markets has significantly benefitted EU and U.S. distillers, vintners, farmers, and the hospitality industry on both sides of the Atlantic, resulting in increased jobs, community investment and consumer choice.
Additionally, many U.S. wine and spirits exporters may face the increasing likelihood that the EU may respond by imposing more tariffs on U.S. wines and other U.S. spirits products.
The next quarter is the busiest time of the year for spirits and wine producers on both sides of the Atlantic as consumers gear up for holiday gift-giving and entertaining. In order to protect the jobs and communities we support, we urgently call on the U.S. and the EU to reach an agreement to de-escalate the current trade disputes by immediately and simultaneously removing the EU’s retaliatory tariff on U.S. whiskey and the U.S. tariffs on EU spirits and wines.
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