TRUMP'S IMPOSITION OF 25% TARIFF ON SCOTCH WHISKY

ANOTHER ROUGH DECISION BY TRUMP LEAVES SCOTCH ON THE ROCKS

A chill wind is blowing through the Scottish glens as the Scotch whisky industry hunkers down to withstand stinging duties on sales to its most valuable export market, the United States.

Scotland’s whisky business has been an export success story. The industry sent 137 million bottles of Scotch to the United States last year, or around four bottles every second. Scotch exports to the U.S. brought in just over one billion pounds ($1.3 billion), accounting for more than a fifth of worldwide export revenues, which grew in 2019 by 8% to a record 4.70 billion pounds ($6 billion).

A 25% tariff has been implemented on US imports of Single Malt Scotch Whisky and Liqueurs wef 18 October 2019.  This is bad news for that industry. Despite the fact that this dispute is about aircraft subsidies, the Scotch Whisky 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 $460 million).

 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 the industry and its supply chain.

We're campaigning for #ToastsNotTariffs from Scotch Whisky Association on Vimeo.

A 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 the UK supply chain, a dropping-off in investment and productivity is expected. Ultimately, jobs could be at risk.

The US is SWA’s largest and most valuable single market, and over £1 billion of Scotch Whisky was exported there last year.
 
The tariff will put competitiveness and Scotch Whisky’s market share at risk.  It will disproportionately impact smaller producers.  SWA expects 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.  The tariff will also have a cumulative impact on consumer choice.  

The Scotch Whisky industry has consistently argued against the imposition of tariffs in their sector.  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.  For this reason, the Scotch Whisky Association - alongside American and European spirits producers - has urged the EU and the US not to draw spirits into trade disputes that have nothing to do with our sector.

It is imperative that the EU and US now take urgent action to de-escalate the trade disputes that have given rise to these tariffs, to ensure that these latest tariffs are not implemented on 18 October, and to ensure that other tariffs – including on the export of American Whiskey to the EU – are removed quickly. In particular, the UK government must now work with both sides to urge a negotiated settlement and to ensure that these damaging tariffs do not take effect.

The damage to the industry will 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, SWA has 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 they work in, and consumers everywhere.

They now need the UK and Scottish governments to work together to ensure distillers can weather the storm.  They want them to consider a range of support to the industry, including reducing the UK tax burden on Scotch Whisky in a new 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.

Notes

• The value of Scotch Whisky exports to the US grew from £280m in 1994 to over £1bn last year 
• By value, 33% of Scotch Whisky exports to the US in 2018 were Single Malts (a value of £344 million, or $463 million).
• The US market accounted for 22% of global value, and 10.7% of global volumes of Scotch Whisky exports in 2018. 
• The Scotch Whisky industry directly employs about 11,000 people in Scotland, and many more indirectly through its supply chain. Over 7,000 of these jobs are in rural areas of Scotland.

Source: SWA, HMRC