US tariff on Scotch whisky has come into force

A 25% tariff on single malt Scotch whisky has now been implemented by the USA.

The value of Scotch whisky exports to the US grew from £280m in 1994 to over £1bn last year, but President Donald Trump’s administration has introduced a new tax on Scotland’s national drink, as part of what he perceives as a trade war. He has also targetted Airbus and French wine.

By value, 33% of Scotch Whisky exports to the US in 2018 were single malts – a value of £344 million, or $463 million.

Scotch Whisky Association chief executive Karen Betts said: ‘A 25% tariff has today been implemented on US imports of Single Malt Scotch Whisky. 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.’

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.

Karen Betts (Photo: Scotch Whisky Association)

Karen continued: ‘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.’

The US market accounted for 22% of global value, and 10.7% of global volumes of Scotch whisky exports in 2018, while 137 million bottles of Scotch whisky were exported to the US in 2018: that’s more than four bottles per second.

Karen concluded: ‘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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