Tariffs of 25% on Tennessee whiskey by the European Union and retaliatory tariffs of the same amount on Scotch whiskey by the United States have hurt exports of both spirits.
After the Trump administration imposed in March 2018 unilaterally a tariff on EU steel and aluminum (inside.beer, 24.4.2018) the European Union did likewise in June 2018 with a tariff USD 3 billion worth of US goods, including whiskey, motorcycles and denim. As a tit-for-tat response the U.S. followed with a 25% tariff on Scotch whiskies last October.
As a consequence, exports of Tennessee whiskey and Scotch Whisky both declined significantly and left losers on both sides.
Since the tariff took effect last October, export of Scotch Whisky to the U.S. has declined by 25%. “The tariffs make Scotch uncompetitive in the U.S. against other spirits and companies are losing sales and market share to competitor products. This is hurting the industry at home as well as threatening the livelihoods of Americans who work in distribution, marketing, and hospitality in the U.S.” says Karen Betts chief executive of the Scotch Whisky Association (SWA). The United States is Scotch whisky's most valuable market, worth over USD 1.2 billion in 2019.
Likewise exports of Tennessee whiskey and rye whiskey from the United States to the European Union have even declined by 33% since the 25% tariff went into effect in June 2018, according to a report released last week by the Distilled Spirits Council of the United States. The European Union is the biggest overseas market for US spirits, accounting for more than half of all American whiskey exports last year.
"The tariffs have derailed a great American export success story," Chris Swonger, CEO of the Council, said in a statement. "American distillers enjoyed two decades of unparalleled growth in the EU prior to the implementation of these retaliatory tariffs," he added.
Still two scenarios could work in favor of the hard-pressed exporters on both sides. The first scenario could see a new free trade agreement between the United Kingdom and the United States after the U.K. declared its exit from the European Union. However, such a trade agreement is not in sight and it seems even more likely that the EU and the U.S. agree in a second scenario on a withdrawal from all retaliatory tariffs when U.S. President Trump will not be re-elected in November.
However, currently it looks more like the dispute between the both sides is escalating. The United States Trade Representative (USTR) announced last week a list of 30 products including beer, gin, vodka, decaffeinated coffee, olives, chocolate and business tools such as metal stamping and punching equipment that could be subjected to new tariffs. Those goods which account for USD 3.1 billion of annual imports from Europe are now under review and could be hit with tariffs of as much as 100% (inside.beer, 25.6.2020).