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  • USA: 25% more for what? What the...

    Comment October 29, 2019 By Denver Cramer

Wow. Just wow. The world has been an interesting place in the last few years. World peace? Who needs it. Global warming? Yeah whatevs. And now stability in trade. Where's the nearest bin? 

Here's a super summary of what's happened and why. 

15 years ago the US Government began litigation around the subsidies provided to European Aerospace juggernaut, Airbus, during the development of the A380 and A350 planes. The argument was that the European Union's (EU) billions in subsidies were negatively affecting the sales of US Aerospace juggernaut Boeing. The World Trade Organisation (WTO) finally ruled on October 2, the subsidies were illegal and the US could reclaim $7.5 billion of lost income through selective tariffs. The crazy thing is that the EU have been underway with their own parallel dispute with the WTO about the US government's alleged illegal financial support of the Boeing with a ruling due in 2020. 

This trade war with the EU isn't in isolation either, cue the new NAFTA agreement - USMCA dealing with $1.2 trillion between the 3 countries or even the trade war with China dealing with $250 billion of exports to the US attracting a 25% tariff.

What these trade wars all have in common is they simply make products and services for businesses and consumers more expensive which brings us back to our beloved whisky and it's non-willing inclusion into the trade war. 

Here's a statement by the Scotch Whisky Association in response to the whisky tariff -

“We are very disappointed that the United States Government has announced a tariff of 25% on imports of Single Malt Scotch Whisky and Liqueurs from the UK. This is a blow to the Scotch Whisky industry.  Despite the fact that this dispute is about aircraft subsidies, our sector has been hit hard, with Single Malt Scotch Whisky representing over half of the total value of UK products on the US Government tariff list (amounting to over $460 million).

“The tariff will undoubtedly damage the Scotch Whisky sector. The US is our largest and most valuable single market, and over £1 billion of Scotch Whisky was exported there last year.  The tariff will put our competitiveness and Scotch Whisky’s market share at risk.  We are also concerned that it will disproportionately impact smaller producers.  We expect to see a negative impact on investment and job creation in Scotland, and longer term impacts on productivity and growth across the industry and our supply chain.  We believe the tariff will also have a cumulative impact on consumer choice.   

“The Scotch Whisky industry has consistently argued against the imposition of tariffs in our sector.  For the last 25 years, trade in spirits between Europe and the US has been tariff-free. In that time, exports of Scotch Whisky to the US and of American Whiskey to the UK and Europe have grown significantly, benefitting communities on both sides of the Atlantic, boosting investment, employment and prosperity for all."

Concerns are reflected in the US too -

Chris Swonger, President and CEO of the Distilled Spirits Council of the United States, stated, “The decision to impose tariffs on imports of EU distilled spirits is a devastating blow to the U.S. spirits industry. While we recognize the U.S. and EU are trying to solve long standing trade disputes, distillers on both sides of the Atlantic have become collateral damage in matters that are completely unrelated to our industry. As the important holiday season approaches, we urgently call upon the U.S. and the EU governments to get back to the negotiating table and return to tariff-free trade with our largest export market.”

Michelle Korsmo, President and CEO, Wine & Spirits Wholesalers of America, said, “These tariffs stand to disrupt consumer-driven, industry-wide growth, and will negatively impact the family-owned businesses who import and distribute the nation’s wine and spirits. When free trade is compromised and business becomes more expensive to conduct, consumers are always left to pay for the damages by way of higher prices.”

 

Our Comment: Why can't we all just be friends? Where is the world coming to when there's essentially an airplane tax on Single Malt whiskies from Ireland and Scotland for our friends in the US. It's a sad time for both sides of the pond. Last year single malt whisky imports to the US accounted for $463 million dollars. These tariffs will have a number of negative consequences including a large number of job losses in both the US and the UK and in the long term, the demand for barrels from Kentucky and Tenessee in the aging of Scotch will slow. It's really hard to find any positives for either side at the end of this. We feel that the issue began in the aerospace industry between too Multi-National companies that can, in-effect, afford the repercussions however explain that now to the retail girl in the liquor store in Oregan, USA and the distillery storeman at the distillery in Speyside, Scotland that will both lose their jobs. Tisk Tisk. 

We would urge all governments to come to a compromise and in the least leave the whisky industry out of it. 

 

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What you need to know. 

1. The 25% tariff is in effect now

2. Only affects Single Malt whiskies from Scotland and Ireland. Means blends will remain unaffected. Interestingly the shares for Diageo went up after the tariffs were announced. 

3. Single Malts from other countries may rise in price due to increased demand. Might be wise to stock up on the single malt Scotches you like or get into Bourbon more. Or even Mezcal!

 

 

 

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