Tariffs imposed on both U.S. spirits and Scotch whiskey as a result of unrelated trade disputes have had a significant impact on spirit sales on both sides of the pond, according to industry figures.
As a result of these tariffs, exports of Kentucky Bourbon fell 35% in 2020, with shipments to the European Union tumbling by nearly 50%, the Kentucky Distillers’ Association announced in February.
Total exports of Kentucky Bourbon and other whiskies were valued at $455 million in 2018. That number plunged to $319 million in 2020, a 35% decrease.
Export values to the EU have nose-dived 48% since the tariffs took effect, from $257 million in 2018 to $135 million last year.
The United Kingdom had historically been the largest market within the EU for Kentucky whiskey, making up a quarter to a third of exports. Sales have plummeted from $67 million in 2018 to just $33 million last year, a 50% drop. The largest EU export country now is Spain at $49 million.
The situation could deteriorate further in June, when the EU expects to double tariffs on American Whiskey to 50%. The EU had traditionally been Kentucky’s largest global market for Bourbon and whiskey, making up 56% of all exports in 2017. It’s now about 40%.
Global exports of Scotch Whisky fell by more than £1.1 billion during 2020, according to figures released in February by the Scotch Whisky Association (SWA). The export figures are the lowest they have been in a decade, as the combined impact of COVID-19 and the 25% tariff in the United States hit distillers hard.
In 2020, the export value of Scotch Whisky exports fell 23% by value to £3.8 billion. The number of 70cl bottles exported fell by 13% to the equivalent of 1.14 billion.
The value and volume of exports to most of Scotch Whisky’s top 10 markets fell as countries went into lockdown to combat the spread of COVID-19 during 2020. The closure of hospitality and travel restrictions impacting airport retail globally saw export values fall in 70% of Scotch Whisky’s global markets compared to 2019. Exports to the EU 27, the industry’s largest regional export market, fell by 15%.
But it is the continued impact of tariffs on exports of Single Malt Scotch Whisky to the United States that has caused the most significant losses, says the SWA. The United States is Scotch Whisky’s most valuable market, valued at over £1 billion in 2019 when it accounted for a fifth of global exports. In 2020, exports of Scotch Whisky to the U.S. fell by 32% to £729 million, a loss of £340 million compared to 2019, and accounting for around one third of total global export losses.
“These figures are a grim reminder of the challenges faced by distillers over the past year, as exports stalled in the face of the coronavirus pandemic and U.S. tariffs. In effect, the industry lost 10 years of growth in 2020 and it’s going to take some time to build back to a position of strength,” says Karen Betts, Chief Executive of the Scotch Whisky Association.
“In these challenging times, what’s so disappointing is the damage being caused by U.S. tariffs. The U.S. has been, for decades, our strongest and most valuable market, but Scotch Whisky is now losing considerable ground there.”
U.S. suspends tariffs on single malt Scotch whisky
In a huge dose of good news for the travel retail industry, the U.S. has agreed to suspend tariffs on UK goods including single malt whiskies, it was announced in the beginning of March. The tariffs were imposed in retaliation over subsidies to the aircraft maker Airbus.
The duties will be suspended for four months while the two sides seek a long- term settlement. Tariffs will also be lifted on UK cheese, cashmere and machinery.
Commenting on the four-month suspension of U.S. tariffs on Scotch Whisky and other products relating to the ongoing Airbus-Boeing trade dispute, Karen Betts said:
“This is fabulous news, and our industry is delighted. The tariff on Single Malt Scotch Whisky exports to the U.S. has been doing real damage to Scotch Whisky in the sixteen months it has been in place, with exports to the U.S. falling by 35%, costing companies over half a billion pounds.”
While the action has no immediate impact on exports of Kentucky Bourbon and other American whiskies, the Kentucky Distillers’ Association is encouraged that the United States and the United Kingdom have agreed to briefly suspend some tariffs involved in the long-running Boeing- Airbus dispute.
“This is a good first step and a hopeful signal that the administration is committed to resolving trade wars that have inflicted so much collateral damage on global markets, including Kentucky’s signature Bourbon industry and our broader American Whiskey family,” KDA President Eric Gregory said.