A cornerstone of President Trump's previous presidency was his "America First" economic policies, marked by draconian trade measures, including sweeping tariffs on a range of foreign imports.
These policies impacted industries closer to home. During Trump’s tenure, a 25% tariff on Scotch Whisky – imposed amid a transatlantic trade dispute – caused significant financial harm, resulting in £600 million in lost exports, or roughly £1 million per day. These tariffs are currently suspended, but their potential reinstatement under a new US administration poses a very serious threat to the Scotch Whisky industry. Scotch Whisky producers must act now to prepare for the possibility of renewed trade barriers that could again disrupt operations and undermine financial stability.
Scotch Whisky sellers operate within a complex ecosystem of agreements with importers, distributors, logistics providers, media agencies and warehousing partners, amongst others. Disrupted trade spreads financial strain across this network, driving up costs, causing inefficiencies and triggering contractual disputes or penalties.
This makes proactive preparation essential. After all, we have had fair warning. Producers should prioritise a detailed review of their commercial contracts to ensure they can handle these challenges. Identifying vulnerabilities that might be related to tariff changes can help reduce liabilities and minimise disruption.
Flexibility is key
Embedding flexibility into contracts is an effective way to manage risk in an unpredictable global market. Provisions for periodic reviews, renegotiations or alternative dispute resolution mechanisms provide critical adaptability. These measures not only help businesses respond quickly to immediate threats but also position them to adjust to future changes, such as new tariffs or regulatory shifts.
Strong relationships with US partners are also vital. The United States remains the largest market for Scotch Whisky exports. Transparent, flexible agreements that include shared solutions, such as pricing adjustments or cost-sharing mechanisms, can preserve these key partnerships and ensure long-term stability.
Cover all bases
The uncertainty surrounding tariffs highlights the importance of thorough legal preparation. If the protectionist warnings turn out to be a false dawn, no harm is done. But if they ring true, those in the industry will rue the day they did not act faster.
Producers must assess their contracts to address risks like trade disruptions. Do they allow for renegotiation or termination if tariffs return? Are responsibilities for cost-sharing or delays clearly defined? Addressing these issues ensures businesses can adapt to even minor changes, safeguarding resilience in an unpredictable market.
Updating force majeure clauses is also critical. Many contracts only address traditional risks, such as natural disasters, and fail to consider modern challenges like geopolitical tensions. Ensuring these provisions reflect current realities provides essential protection.
Finally, contracts must allow for adaptability in response to shifting trade policies. Rigid agreements risk becoming unsustainable if market conditions change. Flexibility to renegotiate ensures producers can remain competitive, even in volatile environments.
Preparing for an uncertain future
For Scotch Whisky sellers, the lessons from the 2019–2021 tariff period are clear: preparation is critical. A proactive approach to contract review and renegotiation is not just about protecting profits; it’s about safeguarding the industry’s long-term stability.
By addressing weaknesses in contractual arrangements and managing risks proactively, Scotch Whisky sellers can better navigate future disruptions. In a volatile global marketplace, decisive action today will help safeguard one of Scotland’s most valuable exports.
This article originally appeared in The Herald and can be read here.
