US Scotch whisky tariffs “unsustainable” as losses hit £500m

By Michelle Perrett

Published: 02 February, 2021

The impact of tariffs on Scotch whisky exports to the US is “unsustainable” as losses for the sector have hit £500m, according to the Scotch Whisky Association (SWA).

A 25% tariff was imposed on single malt Scotch whisky in October 2019 centred on an ongoing trade dispute concerning Airbus and Boeing, which saw the World Trade Organisation (WTO) allow the US to impose $7.5bn worth of tariffs on a range of EU goods last year.

The result has seen exports of Scotch whisky to the US fall by 35%, amounting to over £500m in lost exports. Scotland’s whisky distillers typically generate a fifth of their export sales – some £1bn – from shipments to the US.

The SWA said that these tariffs are not only causing short-term losses to the industry, but also long-term harm to the Scotch whisky category, since the market share lost as a result of tariffs could take years to rebuild.

At the beginning of December 2020 it was revealed the UK was to suspend existing EU-imposed import tariffs on a slew of US products at the end of the Brexit transition period with the hope that a reciprocal move would see harsh US duties on Scotch lifted.

SWA said that there was “deep disappointment” across the industry last month after the UK government failed to conclude a ‘mini-deal’ with the US, which would have removed tariffs on Scotch Whisky and other products such as cashmere caught up in the dispute.

The SWA is urging the UK government to “urgently” call for the immediate suspension of all tariffs and have asked for the resolution of the aerospace dispute by addressing UK violations of WTO rules on subsidies and by agreeing a future regime of support to aerospace with the US.

The SWA is also calling for support to the whisky industry, given the level of losses, including a cut to excise duty in the March budget and a sustained push to reduce the basic customs duty in India, which is currently 150%.

Karen Betts, CEO of the SWA, said that the current situation is “unsustainable” and warned the industry “may never now recover.”

“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,” she said.

“The government must also offer some support to distillers, who are shouldering tariff losses alongside dealing with unprecedently 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.”

Last year the SWA launched a campaign #CallTimeOnTariffs urging whisky lovers to write to their MPs underlining the damage that US tariffs are causing to the Scotch whisky industry and asking them to “urge the government to call time on tariffs”.