Global Whisky Tariffs: Pause, Reflect, and put a Tumbler up
Riverside Whisky Partners takes a look at global tariffs on whisky and its current market condition.
After nearly two years since the first cases of the pandemic started to emerge from China, at that moment in time few people would have thought it would go on to reshape lives, global markets, and governments; yet it did. However! The virus as a single cause was not fully responsible for the slowdown in whisky sales, but an ongoing trade war between China and the United States of America that had started long before the pandemic. Under Donald Trump’s administration tariffs for metals such as Steel and Aluminium soon included commercial aircraft subsidies for Boeing and Airbus. Bringing the European Union and the United Kingdom into the trade war, both Brussels and the UK government were quick to show their position on these new tariffs. This soon escalated to a 25% US tariff on whisky being imposed in October 2019 that would strain relations and exports on both sides of the Atlantic. The permutation saw noticeable drops in whisky exports, with the US alone enduring a 37% plunge in global sales over two year period spanning from 2018 to 2020 – down from $702 million to $440 million bringing sales to their lowest in a decade.
The inauguration of Joe Biden as the 46th president of the United States took place in January 2021. With renewed heartiness, the United Kingdom, European Union, and the United States of America began talks to ease trade hostilities. The result was an agreement to remove whisky trade tariffs, sparking hope for the whisky industry. So what was the outcome and is whisky as an investment opportunity back on the books.
Certainly, the first half of trading for 2021 indicates Scotch whisky exports up 31%, compared to the same period in 2020, and volume up 42%. Yet exports, in general, remain down 10% by value compared to 2019, with the industry still needing to claw back lost growth to bring it in line with the record export performances that were achieved during 2019. The European market for Scotch whisky exports fell in the first quarter of 2021, in comparison to 2019 as further disruptions on the continent continued with producers adjusting to new post-Brexit trading arrangements.
Exports to Asia show the fastest recovery with stable figures indicated for the second half of 2020, leading to incredible first half 2021 sales performance that has surpassed the whole of 2019 sales of £89m, growing 126% to £91m. The Scotch Whisky Association issued figures that demonstrate the recovery process, cross-referencing figures from the year 2019 to 2021.
It may become apparent to those in the know, how the combination of recovery figures and the removal of tariffs could play its role in higher global exports and sales confirmed in the Scotch Whisky Association report. With one of the largest boosts to the single malt whisky market, it should be acknowledged as such; as the UK and US reach an agreement to suspend the 25% tariff on Scotch whisky imposed in 2019 for a needed 5 year period. This in tandem will have its influences on whisky cask pricing from premium and upcoming distilleries, as the rule of ‘Supply and Demand’ tightens its grip once more. With promising reports from news media giants, that includes the Independent, Guardian, Financial Times, and Forbes. One should take time to read some independent news on this subject, which can be found here:
A spokesperson from Riverside Whisky Partners was quoted as saying “Our knowledgeable investors are diversifying portfolios and moving to tangible alternatives like whisky that offer greater stability and attractive levels of potential growth over the medium term. Many choose to acquire casks of younger spirits that still need time to fully mature which they will hold for 5 to 8 years before releasing back into the market, either through auction or in some cases back to the distilleries. Entry levels for these younger whiskies make ownership accessible to most and portfolios can be built-in blocks or stages so although whisky is not a short-term hold; it offers flexibility both at entry and exit”.
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