Scotch whisky is a potential target for US tariffs (pic: Artisanal Spirits Company)
The UK Government must take pre-emptive action to head off Trump’s threat to trade, says JOHN CUMMING
In the sunlit uplands of July, Daily Business published my article on the potential economic consequences for Scotland, if Donald Trump returned to the White House. These included the increased threat of geopolitical instability resulting from the US’s return to isolationism, and the damage which would be done to Scotland’s whisky industry as a result of Trumpian trade tariffs. That possibility is now a reality.
I believe political leaders in the UK must take swift action to mitigate the most momentous implications of a Trump administration. Through judicious manipulation of the economic levers at its disposal the UK government can help to protect key industries.
The UK government’s plans for alcohol duty must be urgently reviewed. In her first budget as Chancellor, Rachel Reeves announced that spirits would be excluded from the government’s plans to cut alcohol duty on draught products. Around 70% of UK spirits are produced in Scotland, with Scotch whisky making up the bulk of this vital industry.
President Trump has been as clear as a hand-cut crystal whisky tumbler about his intention to impose a 10% levy on all imports from Europe. In July, he told Bloomberg: “We love Scotland and Germany. We love all these places. But once you get past that, they treat us violently.”
When he was last in office, Trump’s tariffs cost the Scotch whisky sector an estimated £600m in exports to the US. To be blunt, many distilleries will struggle to survive the pressure of these tariffs, if coupled with the UK government’s tax hike.
Both UK and Scottish governments frequently emphasise Scotch whisky’s economic and cultural importance. With a perilous few years ahead, they must back their words with supportive actions.
The UK government’s increase and extension of the windfall tax on oil and gas companies should also be reviewed, to ensure these key businesses can retain talent in Scotland. The real and current risk is that skilled workers are drawn increasingly to the US, where wages are higher and the incoming president has promised to “drill, baby, drill”. We need these people to stay in Scotland if we are to successfully transition to a green industrial future.
Aside from a supportive approach from government, these sectors – and our economy more broadly – rely on the stability which is derived from our national security. We should never take this for granted. For that reason, I believe our new prime minister Keir Starmer needs to step up and show leadership at a European level.
The UK can be proud of its record on support for Ukraine. We played a leading role in building a coalition of states willing to provide military assistance to counter the illegal war waged by Russia. Scotland, too, has played its part by providing homes to Ukrainian refugees and sharing surplus medical equipment with those on the frontline.
However, European countries including the UK, to my mind, simply have no choice but to raise spending on defence to 2.5% of GDP. The increase in defence spending announced by the Chancellor last week is welcome, but the UK still lacks a clear timeline to achieve the goal of 2.5% of GDP being allocated to defence. Setting out a path to greater security is key if we are to deter hostile states such as Russia. That timeline needs to be clearly defined soon and it needs to be short.
It remains to be seen what Trump’s approach will be to NATO and Europe’s security more widely, but we can say with some certainty that European leaders will need to unite to maintain the stability and security we all depend upon.
Rachel Reeves’ focus on economic growth is to be commended, but it will not be achievable if the UK fails to get serious about its security.
John Cumming is a client manager at Charlotte Street Partners
Leave a Reply