Single Malt Scotch Industry Struggling Under Both the Pandemic and US Tariffs

It’s no secret that the restaurant industry is hurting because of the pandemic, but what about the one industry that has kept so many people sane during this year from hell? The spirits industry is stuck on a rollercoaster called ‘The Pandemic’- It’s seen ups and downs, loops and lags, and there’s no end in sight.

Unfortunately, the pandemic is not the only threat to the spirits industry. Before COVID-19 was on anyone’s radar, tariff wars were threatening many key pockets of the industry, most notably the single malt scotch whisky industry.

Since October 2019 the US has implemented a 25% tariff on single malt scotch whisky exports to the US. The tariff was introduced in retaliation against subsidies that EU members states gave to the European aircraft maker Airbus. Among scotch whisky, the tariff also affects French wine, cheese, and other European goods.

How has the tariff affected the single malt scotch industry? 

Before the tariffs in 2019, the scotch industry had grown to a new high of £4.91 billion in 106 global markets, up by 4.4% from the previous year’s high of £4.7 billion. The US market made up 22% of global value for scotch whisky and 10.7% of global volumes. In 2019, 42 bottles of whisky were shipped each second to the US, according to the Scotch Whisky Association (SWA). Scotch whisky also makes up 20% of UK food and drink exports. The US is the single malt scotch whisky industry’s largest market with more than a fifth of its export revenue coming from there.

Between October 2019 and July 2020, following the implementation of the tariffs, the scotch whisky industry experienced losses around £300 million. By the last financial quarter of 2019, scotch whisky exports to the US had fallen 25%. On top of this, the pandemic caused a drop in sales of 47% in April and 65% in May 2020, further threatening the jobs of 11,000 people employed in the scotch industry in Scotland, and 40,000 jobs in the UK as a whole, not to mention the countless US based jobs that feel the pain of these tariffs. To cope with the losses of single malt scotch, US-based spirits importers are now starting to avoid importing it all together.

Why single-malt scotch whisky?

It seems strange that in retaliation to botched negotiations on airline subsidies the US implemented a tariff on single-malt scotch, but there is a history to this tariff. In June 2018, the EU imposed 25% tariffs on U.S whiskey in response to US tariffs on steel and aluminum. While the US originally wanted to place 100% tariffs on European goods, they settled to match the EU’s 25% tariff.

Since 2018, the SWA has worked with the Distilled Spirits Council of the United States (DISCUS) to pressure the EU and US into ending their tariff war and returning to tariff-free trade for the spirits industry. Given that the UK is no longer a member of the EU, they have limited to no influence on the outcome of this trade dispute, yet continue to feel the brunt of it. Scotland, in particular, bears 58% of the UK’s tariff burden, despite only making up 0.81% of the total value of US imports of goods from the UK. Currently, there is no end in sight.