US suspends tariffs on Scotch whisky

The US has agreed to a four-month suspension of tariffs on UK goods including Scotch whisky in an attempt to resolve a long-running dispute over aviation subsidies.

In a joint statement, the US and the UK said they have agreed to a four-month tariff suspension to “ease the burden on the industry and take a bold, joint step towards resolving the longest-running dispute at the World Trade Organization”.

The UK already agreed to not apply retaliatory tariffs as part of the Boeing/Airbus dispute from 1 January 2021. The US will now suspend tariffs on the UK goods caught up in the dispute form today (4 March) for four months.

The statement continued: “This will allow time to focus on negotiating a balanced settlement to the disputes, and begin seriously addressing the challenges posed by new entrants to the civil aviation market from non-market economies, such as China.

“This will benefit a wide range of industries on both sides of the Atlantic, and allow for focused settlement negotiations to ensure that our aerospace industries can finally see a resolution and focus on Covid recovery and other shared goals.”

Reacting to the news, chief executive of the Scotch Whisky Association, Karen Betts, said the industry was “delighted”.

“The tariff on single malt Scotch whisky exports to the US has been doing real damage to Scotch Whisky in the sixteen months it has been in place, with exports to the US falling by 35%, costing companies over half a billion pounds,” Betts said.

“So today, everyone in our industry – from small companies to large – is breathing a sigh of relief. Suspending these tariffs – stemming from a transatlantic trade dispute that had nothing to do with us – and a return to tariff-free trade with the US means livelihoods and communities across Scotland will be protected. It means that companies can now really focus on recovery – on building back the American market as well as on building back global exports hit by the coronavirus pandemic.

“I want to pay tribute in particular to the hard work of Liz Truss, International Trade Secretary, and her team.  Her commitment to finding a resolution of this issue, alongside Kwasi Kwarteng, Business Secretary, has been very encouraging through what has been a particularly difficult period for our industry.  Distillers will certainly be raising a dram to her tonight.

“The UK government and the new US administration will now need to work hard on finding a negotiated settlement to this long-running aerospace dispute.  We hope too that both governments will be able to find a rapid, pragmatic solution to the steel and aluminium dispute which still impacts US whiskey exports to the UK.”

There has been no comments on whether tariffs will be suspended for products produced in other European nations.

Since October 2019, whisky made in Scotland and Northern Ireland, as well as wine below 14% ABV and liqueurs made in several European nations have been subject to 25% tariffs. Since June 2018, the EU has imposed 25% tariffs on imports of American whiskey.

The outgoing Trump administration imposed additional tariffs from 12 January this year, which saw an additional 25% tariff levied on Cognac and brandy from France and Germany. Wines over 14% ABV made in both countries were also added to the list.

The SWA had said that the tariffs as well as the impact of Covid-19 had contributed to a “lost decade of growth”. 

The association stated that global exports of Scotch fell by over £1.1 billion last year, the lowest level they have been in a decade. Exports fell by 23% by value to £3.8bn and by 13% in volume to the equivalent of 1.14bn 70cl bottles.

Ivan Menezes, chief executive of Diageo, owner of brands including Talisker, Oban and Lagavulin, added: “Today is a very good day for Scotch and Scotland. We recognise the government’s tireless efforts, using the UK’s newly independent trade policy, to deliver the suspension and hopefully in time, a permanent end to these punitive tariffs.

“We pay particular thanks to the Prime Minister, Liz Truss, Alister Jack and their teams for speedily negotiating this truce with the new US administration. Final resolution of the aerospace dispute, combined with the announcement of a continued freeze on spirits duty in yesterday’s Budget, will safeguard thousands of jobs across Scotland and the UK.”

The Distilled Spirits Council of the United States (DISCUS) said it welcomed the news, but added that it was “greatly disappointed that the UK’s debilitating tariff on American whisky remains in place”.

“American whiskey exports to the UK, our fourth largest market, have declined by 53 percent, from US$150 to $71 million since the imposition of tariffs (2018-2020),” the statement read.

It said that while the commitment from both sides represented a “hopeful sign that a resolution to the tariffs on US and UK spirits may be in reach,” it urged both countries “to build on this positive momentum by negotiating an agreement to simultaneously eliminate retaliatory tariffs on all distilled spirits”.