The drinks industry is collectively holding its breath following President-elect Donald Trump promising to tax all goods imported into the United States. Could a trade war be looming during an already tough time for the industry?

Trump vowed on the election trail that he would instate a tariff of 10-20% on every country, with additional tariffs of 60-100% on goods imported from China.

He even proclaimed to Bloomberg that “tariff is the most beautiful word in the dictionary”.

With analysts at UBS estimating that 79% of spirits products alone sold in the US being imported, that’s not good news for drinks companies.

As The Drinks Business notes: “Such a move would have negative effects on the likes of Diageo (40% of its trade is with the US), and Pernod Ricard (30%). It is also the biggest spirits market for Moet Hennessy, Remy Cointreau and Campari.”

Whisky makers unite to fight tariffs

During Trump’s previous term in office, a 25% tariff on single malt scotch whisky was levied between October 2019 and March 2021.

Over this 18-month period, the Scotch whisky industry lost over £600 million in exports to the United States – equivalent to over £1 million a day.

The tariff was suspended for five years in June 2021 and Scotch whisky industry fears that it will once again be collateral damage in a new trade war.

In May 2024, the Scotch Whisky Association (SWA) visited Washington alongside the Distilled Spirits Council of the United States (DISCUS) to meet with members of Congress and partners in the United States to avoid the reinstatement of the 25% tariff. 

SWA International Director Ian McKendrick said: “This issue must be the top of the list of the transatlantic trade agenda once this year’s elections have taken place. 

“The tariffs between 2019 and 2021 were hugely damaging to the Scotch Whisky industry, and to our supply chain partners which extend into the US, especially the trade in casks. A re-run of these damaging tariffs must be avoided.”

President and CEO of the Distilled Spirits Council of the United States Chris Swonger said: “Nearly two years ago, distillers in the United States and Scotland jointly toasted the US and the UK governments for reaching important agreements that secured the removal of retaliatory tariffs on Single Malt Scotch Whisky and American Whiskeys in separate trade disputes wholly unrelated to the distilling sector. 

“These agreements have been instrumental in resetting the crucial trading relationships between the U.S. and UK, benefitting consumers and producers on both sides of the Atlantic.  If an agreement is not reached by June 2026, the 25% US tariff on Single Malt Scotch will return, dampening the recovery of the hard-hit hospitality sector as it emerges from the COVID-19 pandemic.   :

Fears for Australian winemakers

Australia’s wine export market only recently returned to growth, driven by the re-entry of Australian wine exports to mainland China following the removal of tariffs on Australian bottled wine in late March 2024.

Ranked the most attractive wine market in the world for at least eight years in a row by Wine Intelligence, the US was Australia’s second largest export market by volume and value for the year ended June 2024 according to Wine Australia’s export data.

Trade Minister Don Farrell said: “We hope there won’t be a worse trade war after the American election. We want a prosperous region and the best way the Americans can ensure prosperity in our region is by continuing with the free trade rules. We will advocate for more free trade, not less.”

America’s restaurateurs and wine merchants aren’t happy about the prospect of wine tariffs either. They experienced the detrimental effects of them in 2019, when the first Trump administration put tariffs on European wines.

Wine Industry Advisor writes: “Tariffs disrupt the entire US wine industry within the three-tier system, from the immediate U.S. businesses that rely on the sales of imported wines to domestic growers that need healthy distributors for access to market. The American wine market is an ecosystem, where weakness in one tier reverberates throughout.

“For every dollar spent on wines imported from the EU, more than four dollars in revenue is generated for US businesses. The sales of imported wines are particularly crucial for restaurants, as they represent one of the few high-profit items in an otherwise challenging industry. In a sector often characterized by slim margins and intense competition, imported wines offer restaurants an opportunity to enhance profitability.

“It is a common misconception that tariffs on imported wines might encourage consumers to buy more American wine, but wine is not ‘fungible’, meaning wines from different regions are not interchangeable. A consumer seeking a Chianti from Italy will not likely switch to a California Cabernet, as the appeal lies in the unique attributes of wines from specific regions.”