Scotch Whisky Tariff Losses in US Reach Half Billion Pounds

The losses suffered by the Scotch Whisky industry as a result of tariffs on Scotch Whisky exports to the United States have reached half a billion pounds, in a situation the industry warns is  unsustainable.  

A 25% tariff was imposed on Single Malt Scotch Whisky in October 2019 and since then exports of Scotch Whisky to the US have fallen by 35%, amounting to over £500m in lost exports.  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. 

There was deep disappointment across the Scotch Whisky industry last month after the UK government failed to conclude a ‘mini-deal’ with the United States, which would have removed tariffs on Scotch Whisky and other products caught up in the dispute, like cashmere.   

This has left distillers continuing to pay the price for an aerospace dispute that has nothing to do with Scotch Whisky.  The dispute centres around subsides provided to Airbus and Boeing respectively by European governments, including the UK, and by the US government, which were found to be illegal by the World Trade Organisation (WTO). 

The SWA is urging the UK government urgently to call for the immediate suspension of all tariffs on unrelated sectors. At the same time, they say that the UK must work to resolve 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 – as soon as the new US Trade Representative assumes office – that is WTO compliant.  Only then will the tariffs be permanently lifted and the UK government be in a position to live up to its aspiration to be a champion for free and fair trade within the international, rules-based system. 

Large and small producers alike... are losing sales and market share in what has been for decades the industry’s largest and most valuable market, which they may never now recover.

Karen Betts, SWA

The SWA is also calling for support to the 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, Chief Executive of the Scotch Whisky Association, said:  

“The current situation is unsustainable.  Since tariffs were put in place, our exports to the US have fallen by 35%, amounting to over half a billion pounds in lost exports. This is being borne by large and small producers alike, who are losing sales and market share in what has been for decades the industry’s largest and most valuable market, which they 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. 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 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.” 

Notes

Cumulative Scotch Whisky exports to the US (October 2019 – November 2020)

Source: HMRC Export Data and SWA analysis

** The baseline estimate corresponds to the sum of the previous year comparison for October 2019 - September 2020 (i.e. October 2018-September 2019) and a two-year prior comparison for November and October 2020 (i.e. November and October 2018).