Brexit, Trump tariffs put Scotch on rocks
Single malt distilleries in Scotland, pressured by planned EU departure, feeling headaches over duties
Britain’s planned departure from the European Union has turned distiller Anthony Wills’s workdays into a marathon of logistics.
For months, he communicated with importers to ensure that his single malt — whisky distilled from barley harvested from his farm on the windswept isle of Islay — could be shipped to the Continent and the United States in time for the holidays. Then, with the Oct. 31 deadline for Brexit fast approaching, the Trump administration imposed 25 per cent tariffs on a menu of goods including French wine, Italian cheese and — in a move that could drive a Scotsman to drink — single malt whisky.
“It’s a blow,” said Wills, owner of Kilchoman Distillery, who has built a formidable boutique business in the western Scotland countryside. “It doesn’t matter how you try to alleviate the issue, it’s still a big blow.”
The United States was allowed to apply the tariffs after a
World Trade Organization ruling settled a years-long dispute over subsidies for aviation company Airbus. They create a double whammy for Scotland.
Whisky underpins the economy of Islay and much of Scotland. Kilchoman and eight rival Scotch whisky distilleries have flourished here in the past decade. Tourists from North America, Europe and Japan come to wonder at Islay’s coastal beauty, take pictures of hillsides filled with sheep and hairy Highland cattle that look as if they’ve had vigorous blow dries, and soak up the pricey local spirits.
Annual exports of Scotch whisky are worth about $5.9 billion (U.S.), accounting for 70 per cent of Scotland’s food and drink exports and 21 per cent of Britain’s. More than one billion pounds worth of the strong stuff goes to the United States. Almost 1.4 billion pounds worth is sold in the European Union.
As enthusiasm for single malt has grown, whisky tourism has rocketed. About two million visitors toured this year, double the number about a decade ago, according to the Scotch Whisky Association, a trade group. Most hail from Germany and the U.S., and distillers like Wills have readily wrung profit from their thirst. Connoisseurs can be seen sipping whisky on tours of Kilchoman, the huge gleaming copper stills in action nearby.
And there is some romance to finding the right tipple. Tourists drive past peat bogs and deep blue lochs on their way to the distilleries. Water from the lochs is rendered into a fine fiery spirit. The peat and salty air flavour what they drink. Even a deep breath near a distillery offers a back-of-the-throat alcoholic tinge.
Wills has spent nearly half his career distilling this experience into something newcomers can quaff. His single malt has become a popular export, and he cannot believe the predicament his distillery faces. He frets aloud about the cost of absorbing the 25 per cent tariffs. He exports 80 per cent of all that he makes, and sells about 40,000 bottles a year in the U.S. Sales in America have helped spur growth for the past nine years.
Brexit has been a sort of selfimposed pain in the U.K., he said. The Trump tariffs add salt to the wound. “We’re a growing business, and you need all the support you can get,” Wills added in exasperation.
Karen Betts, chief executive of the Scotch Whisky Association, said the Trump administration’s decision to apply tariffs only to single malts was likely to hit smaller producers harder.
“The combination of tariffs in our most valuable market and mitigating the potential impact of Brexit is tough,” she said.
Distillers like Wills cannot lure their U.S. customers to alternative, blended whiskies because they do not produce them, and single malt has been marketed as distinctive, focused on provenance.
Liam Hughes, chief executive of a small distiller in Glasgow, said his company had just sealed a deal to sell whisky to the United States when the tariffs were announced.
“We were all celebrating and we wake up the next morning and find a 25 per cent tariff overnight has been injected into the equation,” Hughes said in a phone interview before flying to Japan to introduce Glasgow Distillery products there.
His distillery prepared for 18 months to begin exporting to the U.S. The company installed two new stills to double production to 1.2 million bottles a year. He hired six more people. The staff has been rushing to prepare moulds and design new labels for the larger bottles required in the U.S.
Hughes had been planning to release a special whisky with a barrel-maker in Kentucky. “Now the cost of that release will increase by 25 per cent, which could be prohibitive,” he said.