Why Whiskey and Cognac Became Regular Targets in Global Trade Wars

Scotch whisky, along with American bourbon and French cognac, has become a frequent target in global trade wars. These spirits are not just beverages but symbols deeply intertwined with regional economies and cultural identities, making them potent bargaining chips in trade disputes.

The history of Scotch whisky in the United States is marked by periods of prohibition and protectionism. Following the repeal of Prohibition in 1933, Scotch gained significant market share, only to be hit by the Smoot-Hawley Tariff Act of 1930, which, along with retaliatory tariffs, contributed to a 60% decline in global trade. Economists have warned that recent tariffs echo this protectionist era.

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Scotch whisky has been a frequent target in trade disputes because it is a symbolic product that is responsible for the regional economy.

In the 21st century, Scotch whisky again found itself in the crosshairs of trade conflicts, notably during the Boeing-Airbus subsidy dispute. In 2019, the World Trade Organization allowed the U.S. to impose punitive tariffs, which significantly impacted Scotch exports. The Scotch Whisky Association reports that Scotch exports account for 77% of Scotland's total food and drink exports, contributing billions to the UK economy and supporting thousands of jobs. The U.S. market alone saw a 15% drop in exports and millions in weekly losses for the industry during a recent tariff period.

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There is no card more effective as leverage in trade negotiations than imposing tariffs on these symbolic liquors.

The strategic targeting of these iconic spirits allows governments to exert immediate and visible pressure on local politicians and economies. For instance, when the EU imposed tariffs on Chinese electric vehicles, China retaliated with tariffs on French cognac, devastating the region's producers and workers. Similarly, the U.S. has targeted Scotch whisky, a key British export, in trade disputes.

Interestingly, Scotch and bourbon share a symbiotic relationship, with Scotch often aged in used bourbon barrels. This interdependence means that trade disputes affecting one can indirectly impact the other. While a recent U.S. presidential statement on lifting Scotch tariffs is a positive sign, the actual impact on prices in markets like Korea will depend on various factors, including import contracts and exchange rates. However, a global whisky surplus may present an opportunity for consumers, potentially leading to price stabilization and increased promotions.

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The tariffs imposed by the Trump administration were the highest in 100 years since Smoot-Hawley.