THE world’s economy is still reeling from Donald Trump’s “liberation day” on April 2 – which saw him levy tariffs on almost every country across the globe.
While experts are struggling to work out what the impacts of those tariffs could be for most industries, there is a clear precedent for Scotch whisky.
During his first tenure as US president, amid a trade spat with the EU about aeroplanes, Trump slapped a 25% tariff rate on spirits. This came into effect in October 2019 and was “paused” by Joe Biden in March 2021.
The timeline gives us a key insight into how tariffs could impact on Scotch whisky exports to the US, the spirit’s largest export market. As the Scotch Whisky Association (SWA) said: “Exports of Scotch whisky to the US fell by 25% in the last three months of 2019.”
Although the impact of the Covid pandemic would then see whisky exports across the world drop, the decline was steeper for US sales, started sooner and recovered more slowly.
Analysis of further data from the SWA shows that from 2019 to 2020, whisky exports to the US by value dropped by 32%. Globally, whisky exports by value dipped by 23%, nine points less.
France, the second biggest international market for Scotch whisky after America, saw exports by value dip by just 13%.
From 2020 to 2021, exports globally rebounded up by 19%. However, the US tariffs remained in place for the first quarter of 2021, which was reflected in the 8% rise in whisky exports to the nation by value – an 11-point difference.
The impact of the tariffs could arguably be said to have continued into 2022, which saw global Scotch whisky exports by value top £6 billion for the first time ever.
While exports to the US topped £1bn, the total by value was slightly less than it had been in 2019 – even though the tariffs had been in place for the final quarter of that year. Other large markets, such as France and India, posted record exports by volume in 2022.
As it stands, the US has a 10% levy on Scotch whisky tariffs, reflecting Trump’s “baseline” tariff levied across the world. Without action, that rate is due to go up to 25% in June 2026 when Biden’s “pause” on the higher rate automatically ends.
SNP MSP Richard Lochhead, who represents Speyside, told The National: “There's no doubt that any tariffs that affect the whisky sector would be highly damaging. We know that from past experience, given the previous hike that hit exports to the US, clearly a huge market for Scotch whisky.
“It's important that the UK Government, in the negotiations with the US, ensures that whisky is at the centre of its attention.
“Of course, I know my colleagues in the Scottish Government are paying very close attention to what progress has been made between the UK and the US.”
"But sadly there's little we can do to change the policies of Trump's administration, which makes it all the more important we focus on the things we can control that would support the industry in this difficult time.”
For the whisky industry, some relief may come in the form of the UK-India trade deal, which will cut tariffs on the spirit from 150% to 75%, with proposals to cut it down to 40% over the next 10 years.
Lochhead said this was down to the “huge amount of leg work” the whisky industry had put in “getting this to be top of the UK Government's agenda when it comes to trade negotiations with India”.
“It really is a milestone and it'll make a big difference to the fortunes of Scotch whisky,” he added.
However, Leadbitter warned: "While the new trade deal is very welcome for the industry, it should not be used as an excuse by the UK Government to avoid dealing with the long-running issue of sky-high spirits duty.
"For a start, the UK Government should reverse its economically illiterate tax hikes on Scotch whisky products which has seen revenue for the industry and the Treasury fall.”
In October last year, the SWA published analysis which showed that tax receipts from whisky had fallen by £300 million per year since the UK Government under the Tories brought in a 10.1% increase in excise duty, which was increased again by Labour.
