The old adage that people are doomed to repeat history if they do not learn from it has once again become uncomfortably relevant for owners of Scotch whisky casks, distilleries and manufacturers.
Once again, Scotch whisky has been caught in the crossfire of a wave of unilateral and retaliatory tariffs, something which one distillery owner talking to the BBC has described as a “big blow”.
The wave of tariffs, one which The Verge noted looked remarkably similar to a strategy consistently proposed by AI chatbots, does not just affect the whisky trade, but given that the United States is the most valuable export market for Scotch, it could signpost potentially major issues for the industry going forward.
For many industries, tariffs on this scale have not been seen since the highly damaging Smoot–Hawley Tariff Act of 1930, something which arguably intensified the effects of the Great Depression, but the effects of retaliatory tariffs were seen just five years ago.
The Great Whisky Trade War
The absurdity of the whisky tariffs of 2019 is that they were collateral damage in a completely unrelated dispute.
In October 2019, the United States imposed a 25 per cent tariff on single malt Scotch, a decision that was made in retaliation to a dispute over subsidies for aeroplane manufacturers Boeing and Airbus.
This issue escalated to other industries including construction vehicles, parmesan cheese, cashmere and Scotch whisky, ultimately ending when the tariffs were suspended on both sides in 2021, as reported by the BBC at the time.
In just 18 months, the Scotch whisky industry lost over £600m and whilst there were other trade disruptions during that time, the tariffs caused significant damage even before March 2020 as importers and distillers split the tariff costs to try and mitigate the damage.
The effects have been significant, pronounced, and have the potential to happen again.
Could History Repeat Itself?
The Scotch Whisky Association responded with disappointment at the news of the tariffs, which are much broader than the ones in 2019 and could potentially have an even greater impact despite the tariff rate being ten per cent rather than 25 per cent.
The Smoot-Hawley Act is an infamous cautionary tale, arguably as impactful to the scale and long-term financial and political impact of The Great Depression as the Wall Street Crash that initiated it.
In the two years after Smoot-Hawley was in effect, global trade collapsed, falling by over 66 per cent and causing havoc both inside and outside of the United States.
Many whisky distillers are exploring how they can navigate the tariffs, with the main option being to once again split the cost with importers.
The issue with tariffs as it pertains to Scotch, however, is not merely limited to the direct increase in costs for distillers and importers as it was in 2019. Instead, the damage to global trade would have a disproportionate effect on the sale of luxury items such as Scotch whisky.
What will happen next is not entirely clear, but many distillers are bracing themselves for more bad news before the economic climate improves.