Diageo warns Trump: proposed tariffs could threaten thousands of American jobs

Diageo, the world’s largest premium alcohol drinks group, has warned President Donald Trump that his proposed import tariffs, especially on products from Canada and Mexico, could put thousands of American jobs at risk.

In a submission to the Office of the US Trade Representative on reviewing unfair trade practices, Alden Schacher, Diageo North America’s vice president for Government Relations, wrote that the tariffs scheduled to come in on April 1 risk backfiring on the American economy and stressed the importance of free trade in supporting US jobs.

“The ability of our US-produced products that utilise substantial US inputs to compete fairly in export markets is critical to Diageo,” the submission said.

“Likewise, Diageo’s ability to supply US consumers with iconic brands that must be produced overseas is essential to supporting US production, sales and distribution jobs, as well as the indirect benefits to the US economy.”

Diageo said it supports more than 178,000 jobs in America, of which 11,500 are either direct employees working in production and sales, or in distribution roles.

Impact on suppliers

It has 11 manufacturing sites in the US, which risk being affected by reciprocal penalties in the EU, Canada and Mexico. In addition, it is planning a US$415 million plant in Alabama.

Diageo said it spends nearly US$650 million a year on sourcing materials in the US including US$100 million on white oak barrels, most of which are then exported to the UK for use in maturing scotch whisky.

North America is Diageo’s largest single market accounting for about 40% of its sales. It generates $1.5 billion (£1.2 billion) in alcohol excise duties for the federal government, the company said.

Schacher’s submission argued that protectionism was not required because trade in spirits was largely reciprocal and balanced. 

Last week, Trump threatened to impose a 200% tariff on EU drinks imports. This followed the EU’s announcement of €26 billion (£22 billion) of counter-tariffs in the wake of the US imposing a 25% penalty on all steel and aluminium imports.

Rather than slap on tariffs, Diageo suggested that the US should tighten “rules of origin” requirements instead. It urged preference to be given to goods where the ingredients are “substantially sourced” from the US and countries with which it has trade agreements.

Reciprocal tariffs

This would benefit the US by virtue of shutting off a loophole whereby “foreign adversaries” use America’s strategic trade partners, such as Mexico and Canada, to “circumvent tariffs”.

Meanwhile, yesterday, France’s Prime Minister, Francois Bayrou said that the proposed EU reintroduction of penalty tariffs on American bourbon and whiskey was “probably mistaken.”

They are planned in response to US tariffs on EU steel and aluminium exports to America.

“Have some missteps been made? Yes, probably because Kentucky bourbon has been included as if it were a trade threat,” Beyrou said in a radio interview.

“A very old product list has been retrieved without it being checked as it should have been,” he said.

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