In October 2019, a 25% ad valorem import tariff was imposed on Scotch whisky entering the United States, significantly impacting the trade between the U.K. and the U.S.
This tariff led to a staggering 30% drop in exports to the U.S., costing U.K. whiskey producers an estimated $800 million before the tax was suspended in 2021.
In 2022, following the suspension of the tariff, the U.K. also lifted its own 25% tariff on U.S. bourbon, signaling a desire for smoother trade relations.
Currently, Prime Minister Keir Starmer is expected to engage with the Trump administration in pursuit of eliminating tariffs on Scotch during upcoming trade talks, a development that is positively received by various industry stakeholders.
For consumers, the implications of these tariffs extend beyond the distilleries.
The price of popular single malt Scotch brands such as Balvenie has seen significant increases over the years, influenced not solely by tariffs but also by fluctuating market conditions.
A decade ago, a 750 ml bottle of the 12-year Balvenie could be purchased for approximately $37.
However, as price tags climbed closer to $70, many consumers turned to more affordable alternatives like bourbon brands Maker’s Mark and Knob Creek.
While tariffs played a crucial role in these rising costs, it’s important to acknowledge that various other factors constantly affect pricing in the spirits market.
Notably, the recent market landscape indicates that the price of Balvenie has remained lower since the suspension of the 25% tariff, suggesting that the tax substantially contributed to its previous escalation.
This price drop may open the door for consumers returning to Scotch, should new tariffs not be reinstated.
However, the uncertainty remains, as a U.S. trade court recently blocked President Donald Trump’s proposed “Liberation Day” tariffs, though a federal appeals court has since temporarily reinstated them.
According to the Scotch Whiskey Association, the reinstatement of the 25% tariff on Scotch will occur automatically in June 2026 if a deal isn’t struck by then.
The broader implications of such trade agreements highlight the detrimental effects of protectionist policies on consumers.
Individual consumers, whether in the U.S. or U.K., end up paying more for their favorite spirits due to tariffs designed to protect local producers.
Ultimately, while government revenues may increase due to these tariffs, governmental protectionist policies often come at the expense of the average consumer.
Historically, this has been a key argument against tariffs, initially championed by Adam Smith in his seminal work, “The Wealth of Nations.”
Smith posited that economic policy should prioritize consumers rather than producers to avoid misallocating resources.
Richard Cobden, a 19th-century English legislator, exemplified this struggle against protectionism with the British Corn Laws, which elevated food prices to safeguard the interests of landowners at the expense of the working class.
His efforts through the Anti-Corn Law League ultimately led to the repeal of these laws in 1846, resulting in lower food prices that significantly benefited the majority of Britons.
The Corn Laws serve as a potent reminder that consumers are the primary victims in protectionist scenarios, a notion that resonates in the current discussions around the whiskey tariffs.
Although a $15 increase on a bottle of Scotch may not be catastrophic for individual wallets, the overarching rise in protectionist measures poses serious threats.
Such policies not only hike consumer prices but also pave the way for political cronyism, where governments use tariffs to manipulate market dynamics, selecting advantageous outcomes for specific industries.
With these policies, politicians gain the power to choose market winners and losers, leading to inefficiencies and innovation stifling.
As discussions around tariffs continue, it becomes crucial to uphold the principles of free trade, benefiting both consumers and entrepreneurs in the marketplace.
While the prospect of tariffs may seem distant from everyday concerns for many, the broader implications of a resurgence in protectionism could severely impact those with less economic flexibility.
To that end, we can only hope for a favorable resolution between Trump and Starmer that allows for American purchases of Scotch and British access to bourbon without the government dictating terms.
Freshly poured, it’s time to raise a glass to the hope of a tariff-free future, where consumers benefit and industry thrives.
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