Tariffs Are Uniting Two Whiskey Heavyweights: Scotch and Bourbon

When Chris Swonger, a leader in the U.S. spirits industry, heard that President Trump would be visiting his golf course in Aberdeenshire, Scotland, this summer he knew he needed to be there, too. He had a seemingly counterintuitive request: zero tariffs on Scotch whisky imported into the United States.

For American whiskey producers, dominated by Kentucky’s bourbon industry, the prospect of higher prices for Scotch caused by tariffs has not been seen as an opportunity to edge out competition. The whiskey business has an interconnected, Atlantic-spanning relationship, they say, and both sides stand to lose.

“Our industry has thrived because we are so closely intertwined together,” said Mr. Swonger, the head of the Distilled Spirits Council of the United States. The tariffs on British spirits “would be detrimental to the U.S. economy and be detrimental to U.S. consumers,” he added.

In recent months, Mr. Trump has pushed to rewrite global trade and impose tariffs that he expects will raise trillions of dollars in revenue and increase American jobs. But some industries fear that the levies will lead to job losses, as tariffs unravel a complex web of supply chains, which economists expect to slow U.S. economic growth.

In May, Britain became the first country to announce a trade agreement with the United States, which lowered tariffs on British cars and airplane parts. But Mr. Trump kept an additional 10 percent tariff on almost all other imports. Efforts to rewrite that deal and push tariffs lower have intensified ahead of Mr. Trump’s state visit to Britain this week.

Each year, Scotch makers export 90 percent of their product, and their biggest market is the United States. But if the 10 percent tariffs persist, the United States will lose 3,300 jobs, and the U.S. hospitality industry would lose $300 million, according to the distilled spirits council.

“It’ll impact distributors and retailers and bartenders and, ultimately, the consumer,” Mr. Swonger said. And so his organization, as well as the Kentucky Distillers’ Association, is lobbying American officials daily to tweak the deal with Britain.

During the trip in late July, Mr. Swonger met with Mark Kent, the chief executive of the Scotch Whisky Association, at the Glen Garioch Distillery about 12 miles northwest of Mr. Trump’s Aberdeenshire golf resort. With a dram in hand, they both called for the 10 percent tariff on Scotch to be removed.

Scottish officials are also pressing the government in London to pitch Mr. Trump and his officials for a carve-out. Though Mr. Trump has said the deal is “done,” the whiskey industry is optimistic that it’s not entirely settled.

John Swinney, the first minister of Scotland, said that there was a “window of opportunity” for an exemption for Scotch after meeting Mr. Trump in July. He redoubled his efforts last week at another meeting with Mr. Trump at the White House and made the case to lawmakers on Capitol Hill, supported by Mr. Swonger from the American lobby group.

“We are now entering the critical days on which hopes of a better tariff deal for Scotch whisky rest,” Mr. Swinney said last week. He later told reporters there was a “real chance” of lowering the levies.

Many of the largest liquor companies own distilleries in the United States and Scotland, such as the Kentucky group Brown-Forman. Diageo, the London spirits giant that owns Bulleit bourbon and Johnnie Walker Scotch, said tariffs would cost it $200 million a year.

But the interconnected nature of the whiskey industry can be seen most clearly in the barrels. Bourbon has to be made in new American oak barrels. Afterward, those used barrels are shipped to Scotlandto age Scotch.

For American distilleries, it’s an important trade: Rather than having to spend money destroying the barrels, they make money selling them. Scottish producers buy about $300 million in old bourbon casks a year, according to the Scotch Whisky Association.

One buyer is Anthony Wills, the founder of Kilchoman Distillery, on the Scottish island of Islay, famous for its single-malt Scotch. About 60 percent of the barrels he uses are from Kentucky.

The tariffs are another blow to an industry that’s already suffering a downturn, he said. People are drinking less, in part because of general economic anxiety or widespread health warnings.

“Everyone’s been affected by this, from the malting companies right the way through to glass manufacturers,” Mr. Wills said.

For most of the past three decades, there have been zero tariffs on spirits. In 2019, though, Scotch and Irish whiskeys were hit with a 25 percent tariff in retaliation for a long-running dispute between the United States and European Union over subsidies for Airbus and Boeing. Mr. Wills absorbed the cost for the 16 months they were in place.

This time, he is sharing the cost of the 10 percent tariffs with his importer, but will stop doing so by the end of the year. “It’s a double whammy because the market is fragile anyway,” he said.