Scott Wright: Tackling Trump whisky tariff is huge test for Johnson

What is increasingly worrying the industry, though, is the threat it faces in the US, its most lucrative market, in light of the Trump administration’s steadfast commitment to maintaining a 25 per cent tariff on imports of single malt Scotch whisky and whisky liqueurs.

Unveiling the 2019 export figures last Tuesday, the SWA described the tariffs as “very concerning”. And its frustration deepened three days later, when the US trade representative declared America had no intention of shifting its position (though there may have been some relief the tariffs were not extended to include blended Scotch).

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Although the value of Scotch whisky exported to the US increased by 2.7% to £1.07bn in 2019, the volume of spirit shipped to the market dropped by 7% to 127 million 70cl bottles. That followed a sharp decline in the fourth quarter after the tariffs came in.

The SWA fears the tariffs will cost the industry at least £100m in exports over a year, and has warned the tax is already hitting the industry hard, with small producers bearing the brunt. Some distillers are now understood to be seriously considering whether they should continue exporting to the US at all, which seems unthinkable given how popular whisky continues to be across the pond.

These are extraordinary times we are living through, of course, when the certainties of recent decades are suddenly being thrown up into the air.

But even so, it would have come as a shock to the Scotch whisky industry in October when, amid a dispute between the US and the European Union (EU) over subsidies given by Brussels to Airbus, the Trump administration retaliated with tariffs of its own. These cover cashmere and shortbread as well as single malt and whisky liqueur.

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“The US and UK must now redouble their efforts to resolve transatlantic trade disputes quickly, so that Scotch and American whiskies can return to the tariff-free trade from which we have benefited for more than 20 years,” stressed SWA chief executive Karen Betts. “It cannot be right that our industry is continuing to pay the price of trade disputes that have nothing to do with our sector.”

The Conservative Government may well argue that, now the UK has begun its technical departure from the EU, it will soon be able strike its own deal with the US.

As those talks move into view, the SWA said yesterday that early commitments from the UK and US to eliminate the tariffs would be an “important confidence building measure”, noting this would “set the tone for constructive, broader bilateral talks leading to an ambitious outcome”.

It welcomed the commitment given by Boris Johnson to remove EU tariffs on US whiskey as soon as legally possible, now that Brexit is under way.

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Precedence dictates, however, that it will take several years for the UK to negotiate a far-reaching deal with the US. It took seven years, for example, for the EU to strike a deal with Canada.

And of course there is no guarantee any deal with the US will lead to a favourable outcome for whisky. As underlined by its trade war with China, the US will be tough to deal with. Whisky is one of many pawns in this game of chess, and there is no certainty it will emerge unscathed from this high-stakes negotiation.

In the meantime, the SWA has ramped up its campaign for a cut in excise duty in next month’s Budget, to help ease the losses distillers are incurring in the US. That will have taken on added urgency in recent weeks, with the emergence of the coronavirus as a difficulty in the rapidly-growing Chinese market.

At times like these, it will be a relief to the whisky industry that there are many other international markets where single malt remains in strong demand.