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Scotch whisky production is undergoing a significant decline as the industry navigates challenging global market conditions. Central to this decline are tariffs imposed on exports to the United States, the largest market for Scotch whisky. These tariffs, initially introduced during the Trump administration and adding an extra 10% cost for importers, have dampened sales. Moreover, the additional 25% tariff on single malts, suspended four years ago, threatens to return next spring unless an agreement is reached. Single malts, which command premium prices, play a crucial role in exports to the US and are particularly affected by these changes.
The difficulties faced by the Scotch whisky sector are not limited to the American market. Demand is also weakening across various regions due to factors such as slowed economic growth, tightening consumer spending, rising taxes, higher costs linked to packaging regulations, and trade disruptions. The Chinese market, for instance, experienced a substantial drop in shipments, declining by 31% last year and falling from the fifth to the tenth biggest market for Scotch whisky. Although the value of Scotch exports rose by about 1% during the first six months of this year to £2.5 billion, overall volumes fell by nearly 4%. It is also important to note that the full impact of US tariffs might not yet be apparent since distillers had quickly stockpiled whisky in the US before the tariffs took effect.
Despite these hurdles, there is a hopeful prospect for distillers in India, the world’s largest whisky market and last year’s top importer of Scotch by volume, having overtaken France. Tariffs currently set at 150% per bottle are expected to reduce gradually to 40% following a trade deal between the UK and India. However, the ratification process may be lengthy in both countries, delaying relief that could otherwise mitigate the current slump in the near term.
The downturn in the industry extends beyond distillers to suppliers, notably barley farmers. Demand for malted barley has plunged, with expectations for next year’s usage dropping from between 900,000 and 1 million tonnes to approximately 600,000
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