An Unsexy History of Tariffs.

Politics and global trade policy is often deeply unsexy and immensely complicated.

We’re going to try to provide a simplified explanation and the resulting implications of the most recent whiskey tariffs of 2019 and what we might expect on the retail shelf should something similar happen again in 2025.

How the hell are jet planes invovled?!

During the first Trump presidency, tariffs on whisky imports, particularly Scotch whisky, were imposed as part of a broader trade dispute between the U.S. and the European Union (EU). These retaliatory tariffs were introduced in October 2019, 15 years after the trade dispute kicked off.

The Boeing/Airbus tariffs were part of a trade dispute between the United States and the European Union (EU) over subsidies to their respective aerospace giants, Boeing (U.S.) and Airbus (EU). This dispute, which began in 2004, led to a series of retaliatory tariffs that affected a wide range of industries, including whisky. Here’s how these events are connected:

WTO Rulings and Tariff Retaliation

Both the U.S. and EU accused each other of unfairly subsidizing their aerospace companies. The World Trade Organization (WTO) ruled that both sides were providing illegal subsidies.

After these rulings, the WTO allowed each party to impose tariffs on goods from the other as compensation. The U.S. imposed tariffs on EU products, and the EU later responded with tariffs on U.S. goods, , including American whisky.

The U.S. had also targeted EU whisky, including Scotch whisky and Irish whiskey produced in the EU, as part of its broader tariff package.

Symbolic and Economic Leverage

Whisky and aerospace are significant export industries for the U.S. and the EU, respectively. By targeting whisky, both sides sought to put economic and political pressure on regions heavily involved in these industries, such as Scotland for Scotch whisky and Kentucky for American bourbon.

• These tariffs had less to do with whisky itself and more to do with using high-profile industries to gain leverage in the broader trade conflict.

Broader Impacts

The tariffs disrupted global supply chains and caused significant financial harm to whisky producers on both sides of the Atlantic, many of whom had no direct connection to the aerospace subsidies. This led to lobbying efforts from the whisky industry to resolve the dispute, highlighting the collateral damage of trade wars on unrelated sectors.

Impact on Scotch Whisky Exports and the effect on U.S. Consumers and Distributors

Exports of Scotch whisky to the U.S. dropped significantly, with industry reports indicating a decline of roughly 30% in the year following the tariff's implementation. This resulted in substantial revenue losses for Scotch whisky producers, amounting to hundreds of millions of dollars.

U.S. consumers faced higher prices for Scotch whisky due to the tariff, as importers and distributors passed on the added costs. This led to decreased sales and inventory challenges for U.S. businesses reliant on Scotch whisky.

Broader Industry Fallout and the Impact on U.S. Whiskey Exports

The Scotch whisky industry, a major contributor to the UK economy and one of its largest exports, suffered significantly. Small and medium-sized distilleries were particularly hard-hit, as they often rely heavily on the U.S. market.

The EU tariffs on American whiskies impacted U.S. whiskey producers, especially small and medium-sized distillers, as exports to Europe declined. The EU was the largest export market for American whiskey at the time.

Exports of U.S. whiskey to the EU fell by more than 35%, according to the Distilled Spirits Council of the United States (DISCUS).

Resolution, Recovery and Long-Term Ramifications

The tariffs became a focal point of trade negotiations between the U.S., the UK, and the EU. After extended discussions, the tariffs were suspended in 2021 under the Biden administration, as part of a broader agreement to ease trade tensions.

The Scotch and American whiskey industries had to work to rebuild market share and recover lost revenue. The dispute underscored the interconnectedness of global trade and the ripple effects of protectionist policies. The impact of the tariffs strengthened calls for governments to avoid using the beverage alcohol sector as leverage in unrelated trade disputes.

While we can predict a similar outcome for any potential future whiskey tariffs, the overall impact will depend on the scope and duration of the tariffs in a far less stable American economy, as well as the political willingness of the U.S. and its trading partners to resolve the underlying disputes.