US slaps 25% tariff on Scotch whisky

The US is set to enforce US$7.5 billion of tariffs on exports from the EU, including Scotch whisky and liqueurs, over an ongoing dispute with the World Trade Organization (WTO).

Yesterday (2 October), the US government announced it would impose a 25% import tariff on EU goods, including Scotch whisky, liqueurs, cordials and wine. The US has also imposed a 10% tariff on aircrafts.

The US said it had the authority to increase the tariffs, which will come into effect on 18 October 2019, “at any time” or change the products affected.

The US has been embroiled in a ongoing spat with the WTO over illegal subsidies for plane manufacturers Airbus and Boeing.

Trade group the Distilled Spirits Council said these new tariffs will have “numerous unintended negative consequences” on jobs and consumers in the US, as well as US firms operating in the EU wine and spirits industry.

Analysis from the trade association shows that the US tariffs on Scotch, liqueurs and cordials, and wine could impact almost US$3.4bn in imports. It could also result in the loss of around 13,000 jobs in the country, including bartenders and farmers.

The two nations first reached an agreement for tariff-free trade in distilled spirits in 1994.

The new US tariffs are the latest blow to hit the industry since the EU’s 25% retaliatory tariff on US products, including American whiskey, was imposed in July 2018, resulting in a 21% sales decrease.

US president Donald Trump locked the US in various trade wars in 2018 after imposing 25% and 10% tariffs on steel and aluminium imports respectively, effective from 1 June 2018.

Industry response

Chris Swonger, the president and CEO of Distilled Spirits Council, called the move a “devastating blow to the US spirits industry”.

He said: “While we recognise the US and EU are trying to solve long-standing trade disputes, distillers on both sides of the Atlantic have become collateral damage in matters that are completely unrelated to our industry.

“As the important holiday season approaches, we urgently call upon the US and the EU governments to get back to the negotiating table and return to tariff-free trade with our largest export market.”

Ulrich Adam, director general of Spirits Europe, branded the decision as “unacceptable”, claiming that the industry should not have to foot the bill over a row “essentially about civil aircraft subsidies”.

He said: “It is particularly irritating to see that unrelated sectors like ours will be hit by an extra 25% tariffs when the sector at stake will only be imposed a 10% rate.

“Most importantly, for the last 18 months, we have recurrently underlined that imposing tariffs on spirits harms consumers and producers on both sides of the Atlantic alike.

“The success of the spirits sector in the United States and in the European Union is mutually reinforcing. Indeed, many of our European producers operate distilleries and production sites in the US, while many American producers also own distilleries in Europe.

“We call on the president-elect of the European Commission and the commissioner designate for trade to find a negotiated solution with their American counterparts as soon as possible and to de-escalate the current situation.”

The American Craft Spirits Association (ACSA) is also urging the US government to “work collaboratively with the EU to ensure all American businesses, including craft spirits, prosper”.

The ACSA’s CEO, Margie Lehrman, said: “The threat of additional retaliatory tariffs from the EU on American rum, vodka, and brandy imports from the US will further limit our market access, directly affecting not just our distillers and their families – who collectively make up a workforce of more than 20,000 employees across the US.”

Michelle Korsmo, president and CEO, Wine & Spirits Wholesalers of America, said: “These tariffs stand to disrupt consumer-driven, industry-wide growth, and will negatively impact the family-owned businesses who import and distribute the nation’s wine and spirits. When free trade is compromised and business becomes more expensive to conduct, consumers are always left to pay for the damages by way of higher prices.”

Robert M. Tobiassen, president of the National Association of Beverage Importers, added: “These tariffs will devastate, perhaps destroy, many small- and medium-sized family businesses importing these products into the United States.”

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