American whiskey falls victim to Trump's trade war

American distillers are reeling following the announcement China will impose a 25% tariff on whiskey imports. 

President Trump officially enacted a 25% tariff last week on steel and aluminum imports and China's response has been swift and harsh.

It has issued a $US50 billion list of US goods that will be subjected to a 25% tariff, including soybeans, small aircraft, beef, passenger vehicles and industrial chemicals. Whiskey is the only spirit to appear on the list. 

US whiskey accounted for nearly 70% of the total US spirits exported to China, by value, in 2017.

While the UK is ranked the number one source for China’s imported whisk(e)y, with 6.6 million litres worth about $US54 million exported to China from January to June 2017, the US followed in second position, trailed by Japan, Taiwan and South Korea.

Christine LoCascio, senior vice president of international affairs, the Distilled Spirits Council of the United States (DISCUS) recently told Xinhua."We've seen growth in China and our exports are up almost 15% compared to 2016.

"China is a huge spirits market, and we just see it quite an opportunity for us." 

DISCUS has asked the United States and China to reach a resolution without subjecting American whiskey to more tariffs, which it said would harm Chinese consumers, its hospitality sector and US whiskey exporters. 

According to Reuters, Cui Tiankai, China’s ambassador to the United States, held an hour-long meeting at the US State Department in Washington with acting Secretary of State John Sullivan.

“Negotiation would still be our preference, but it takes two to tango. We will see what the US will do,” the ambassador said afterwards.

Reuters notes: "The trade actions will not be carried out immediately, so there may be room for maneuver. Publication of Washington’s list on Tuesday started a period of public comment and consultation expected to last around two months. The effective date of China’s moves depends on when the US action takes effect.

"If the two countries are unable to settle the dispute, a full-scale trade war could destabilize US-Chinese commercial ties, an important component of the global economy."

Brown-Forman an "unfortunate and unintended victim" 

The CEO of Brown-Forman, Paul Varga, forshadowed last month that his company could suffer if Trump pressed ahead with tariffs. 

Brown-Forman makes Jack Daniels, Early Times, Woodford Reserve and Old Forester whiskey. 

"We’re going to monitor the potential for retaliatory tariffs closely. And of course, we’re sharing our point of view in Washington, as well," Varga said.

 Varga said he sees an "irony" in the Trump tariffs: while the US administration says they will boost American manufacturers, Brown-Forman, a "committed, long-term American manufacturing company," could be a loser if a trade fight breaks out.

A whiskey tax is also being threatened in Europe, Brown-Forman's second largest market after the United States. It's feared such a tax would raise the company's production costs.

European Trade Commissioner Cecilia Malmström said that the bloc is considering new taxes on products including bourbon, orange juice, denim, cranberries, peanut butter and motorcycles.

Germany, the largest economy in the EU, is a top steel and aluminum exporter to the United States. German Foreign Minister Sigmar Gabriel has said, "The EU must respond decisively to US punitive tariffs, which endangers thousands of jobs in Europe. There should be no doubt about that in Washington."