Politics

Scottish whisky to be 'hit hard' by US tariffs after EU Airbus ruling

Key Points
  • The U.S. plans to impose a 25% tariff on Scottish whisky imports as well as other  EU goods including aircraft and agricultural products.
  • The Office of the U.S. Trade Representative decision follows a WTO ruling related to subsidies that helped to develop Airbus planes.
  • The WTO said U.S. plane makers, essentially Boeing, had been unfairly impacted by the subsidies from some EU governments.
Jeff J Mitchell | Getty Images

The Scottish Whisky Association has said the planned U.S. tariffs on the spirit drink is disproportionate and will "undoubtedly damage" sales.

The U.S. has announced it will bring in a tariff of 25% on imports of single malt Scotch whisky and liqueurs from the U.K. The move follows a World Trade Organization (WTO) ruling that says the U.S. is entitled to recoup almost $7.5 billion dollars a year via tariffs on EU imports.

The WTO decision was related to the accusation that several EU governments granted illegal subsidies to the plane maker Airbus as it looked to develop and sell planes. The WTO said the move had negatively impacted sales of U.S. made planes in the large and very large aircraft market.

"The tariff will undoubtedly damage the Scotch Whisky sector. The U.S. is our largest and most valuable single market, and over £1 billion of Scotch Whisky was exported there last year," said Scottish Whisky Association chief executive Karen Betts, in a statement Thursday.

Several items from different European countries are being targeted but Betts said Scottish Whisky had come out of the decision particularly badly and would amount to $460 million worth of tariffs annually.

"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 U.K. products on the U.S. Government tariff list."

Blended whisky is exempt from tariffs, meaning that Diageo's popular Johnnie Walker brand is unaffected by U.S tariffs. Shares in Diageo, which also owns Smirnoff and Guinness, rose by nearly 1.5% in Thursday morning trade.

The USTR released a list Wednesday of products it plans to target from Oct. 18 onwards. The duties include:

  • 10% tariffs on aircraft from France, Germany, Spain or the United Kingdom
  • 25% duties on single-malt Irish and Scotch whiskies, various garments and blankets from the U.K.
  • 25% tariffs on coffee and certain tools and machinery from Germany
  • 25% duties on various cheeses, olive oil and frozen meat from Germany, Spain and the U.K.
  • 25% tariffs on certain pork products, butter and yogurt from multiple countries

In 2018, the U.S. imported about $488 billion in products from the EU while the U.S. sent about $319 billion in goods to EU countries.

In its response to Wednesday's decision, the U.K. government Department of Trade and Industry said: "resorting to tariffs is not in the interests of the U.K., EU or U.S."

The U.K. government also claimed that the U.K. "and other Airbus nations" had taken steps to bring support for the plane maker into compliance.

It added that it had seen no effort by the United States to bring its support for Boeing into WTO compliance.

The WTO is expected to offer its ruling on the EU's subsidy case against Boeing in 2020.

CNBC's Jacob Pramuk and Kayla Tausche contributed to this report.

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