Trade war – as devastating as Prohibition?

The Irish Whiskey Association has expressed grave concern over the possible implications for the boom in exports of Irish spirits to the US should a trade war break out if US President Donald Trump follows through on his threat to impose import tariffs on steel and aluminium coming into the country and the EU’s retaliatory counter-threat to impose a tariff on imports of American whiskey and Bourbon..

According to Irish producers this scenario could be much more damaging to the Irish whiskey industry than Brexit.

The US President has threatened to impose a 25% tariff on steel imports and a 10% duty on aluminium imports in an attempt to stimulate the domestic the US metal manufacturing industry and has until the end of next week to implement this.

In the meantime the Irish Spirits Association is working with SpiritsEurope and four other trade associations as well as seven spirits suppliers in extensive lobbying on the issue.

The first objective of the EU is to have steel and aluminium removed from any US list of tariffs. If that fails to happen then EU Trade Commissioner Cecilia Malmström may publish (as early as tomorrow) an official list of products and categories that the EU will impose tariffs on by way of countermeasures. These are most likely to include Bourbon and US whiskies.

Here in Ireland, it’s feared that the US could retaliate to such a measure by putting tariffs on Irish whiskey.

Taoiseach Leo Varadkar will raise the issue of trade and tariffs between the US and the EU when he meets the US President as part of the St Patrick’s Day ceremony in the White House.

“When I hear Bourbon whiskey I think the next response might be tariffs against Irish whiskey so what you get into is a spiral of tit-for-tats,” he told a meeting in Austin, Texas, recently, according to a report in the Irish Examiner.

“We have a strong economic case for avoiding tariffs on Irish whiskey,” Irish Spirits Association Head Head William Lavelle told Drinks Industry Ireland, “We’ve an awful lot of eggs in one basket here and are particularly reliant on the US. Some 45% of our Irish whiskey by volume and 59% by value is sold into the US.”

In addition, over 50% of Irish cream liqueurs by value are exported to the US market and with Ireland enjoying duty-free access to the US as part of the EU since 1995, some 120 million bottles of Irish spirits – whiskies and cream liqueur –  are expected to be sold there this year and he warned that this exporting success could be put in jeopardy if Irish spirits exports to the US were to be targeted.

“The impact of such a trade war could be as devastating for the Irish whiskey and spirits industry as Prohibition was in the US when the Irish whiskey industry collapsed from being the powerhouse of global whiskey supply to near extinction,” he added, “We’re currently exposed to the US in the same way as other food sectors are exposed to Brixit. So tariffs will make it worse than Brexit’s effect on other Irish agri-food sectors.”

The imposition of tariffs on Irish spirits could result in distillery and plant closures here with job losses and major losses to Irish tillage and dairy farmers since the Irish drinks industry purchases 15% of its barley harvest as well as 12% of the country’s milk yield.

Extensive EU lobbying is going on over the issue at present, “… more than any other issue as it’s such a critical issue for us but it’s changing by the day,” stated William Lavelle, “But we’re hoping for a positive outcome as getting into a tariff war in any category is bad for Ireland”.