US tariffs will be hard to swallow for whisky industry

Donald Trump has always had a special place in his heart for Scotland. Over the years, he’s shown his appreciation for his mother’s birthplace in myriad ways. Most notably, by creating a controversial Aberdeenshire golf resort that has reportedly “destroyed” the local sand dune ecosystem. But Trump isn’t the type to limit his ambitions to ruining a site of special scientific interest. In 2012, he put his name to a single malt whisky – “the finest whisky available” at his Scottish golf resorts, no less.

So it may come as a surprise that he is making life more difficult for Scotland’s national tipple. Today, the US threatened to impose tariffs on European Union imports including scotch “in response to harm caused by EU aircraft subsidies”. As yet, there are no details on what the tariffs will involve – other than they could amount to $4bn (£3.2bn). And, of course, they may well prove nothing more than a threat.

But either way, the scotch industry will be sitting up and listening. For the US has emerged as a massive market for whisky. Scotch exports to North America soared 12.9% to £1,260m in 2018, according to HMRC data, making it the second largest market outside Europe. Considering Europe grew at a far slower rate of 1.4% to £1,392m, the US could soon overtake it in terms of value sales. If it continues to enjoy zero-tariff status, that is. The imposition of tariffs could swiftly put an end to this burgeoning US growth, which surpassed £140m last year.

This isn’t coming at a particularly good time for the industry. In May, SWA chairman Peter Gordon warned against complacency over scotch’s place as the world’s number one whisky, after its share of global whisky sales fell from 26% to 23% between 2003 and 2007. Whisky as a whole is also battling against younger, fashion-conscious drinkers switching to gin and rum.

Distillers are working to tackle perceptions of whisky as a slightly dusty, old man’s drink. Innovations have included everything from a blend of scotch and calvados to a botanical whisky drink with grapefruit. But none of this is likely to make a difference to the US crowd if tariffs make scotch significantly pricier – especially when it has no shortage of home-grown whiskeys.

That’s probably why the Scotch Whisky Association has so quickly come out against the proposed tariffs, branding it “disappointing that scotch whisky has been drawn into this dispute”. It is urging the UK government, the EU and the US government to resolve the situation.

Of course, Brexit is the elephant in the room among all this furore. If we leave the EU as planned on 31 October, these US tariffs will be academic. Whatever the deal (or no deal) is, it will pose much wider challenges in terms of tariffs. So even if Donald Trump decides not to deal Scotland another blow, the £4.7bn whisky export market is likely to have a fight on its hands.