Whiskey sour? Importers in China fret over US trade battle

SHANGHAI •When spirits dealer Daniel Taytslin brought his first pallet of American Ragtime Rye whiskey into Shanghai earlier this month, the 672 bottles faced a 5 per cent import tariff at China's Customs.

His next shipment from New York could be a lot more expensive as China prepares to slap a 25 per cent additional tariff on hundreds of American products, including whiskey, because of a deepening trade dispute with the United States.

Mr Taytslin and other US whiskey importers say the worsening row is making small traders, as well as big business, very anxious.

Some are accelerating shipments through Customs to avoid potential tariff hikes. Others are reporting unusual delays at Customs that they worry are linked to trade tensions.

The uncertainty gripping the niche market - US whiskey imports to China were worth only US$8.9 million (S$11.6 million) last year - reflects the wider concern in the US business community in China that the trade stand-off could spark major disruption for American products in the world's second-largest economy.

China's overall market was worth US$611.5 million in 2016, according to the latest data from wine and spirits analytics firm IWSR, with Scottish whisky imports taking up virtually all of that.

The uncertainty gripping the niche market reflects the wider concern in the US business community in China that the trade stand-off could spark major disruption for American products in the world's second-largest economy.

US whiskey imports are in second place but growing rapidly.

Beijing last week said it would not back out of a trade fight with Washington, dashing hopes for an easing of tensions after Chinese President Xi Jinping vowed to open the country's economy further and lower import duties on some goods.

The US is planning 25 per cent tariffs on some 1,300 Chinese industrial, technology, transport and medical products. Chinese metal parts manufacturers have warned of factory closures or extra costs passed to US customers.

China has fired back with a planned 25 per cent tariff on whiskey and around 100 other US products, but has not yet said when it will take effect. It has, however, already raised tariffs on some other US products, including fruit and wine, in response to Washington's imposition of duties on aluminium and steel imports.

Mr Taytslin is already looking to take some of his goods out of a bonded warehouse in Shanghai, paying import taxes on them ahead of schedule to avoid being hit by increased tariffs.

He is also debating whether to pass on the higher prices for his future US whiskey shipments to customers.

The hikes could hit a growing industry of smaller craft US whiskies, as well as bigger names like Brown-Forman Corp, the Kentucky-based maker of Jack Daniels and Woodford Reserve.

The US Distilled Spirits Council said in a statement this month that it hoped for a quick solution to the trade dispute to avoid a tariff hike that would "harm Chinese consumers, its hospitality sector and US whiskey exporters".

Mr James Leung, business director at Zhuhai Independent Wine & Spirit, which imports US bourbon whiskey brand Heaven Hill, said he had been told a container of at least one major US whiskey brand was being held at a Chinese port.

This had prompted him to notify China customers that he may have to ration supplies, due to concern that his own container shipments could be held up.

At Senator Saloon bar in central Shanghai, bartenders Elephant Zhang and Jeremy Yang said they expected consumers to shake off any price hikes.

"It's like Japanese whisky," said Mr Yang, drawing comparisons to a tipple that has seen its price surge in recent years due to rising demand and limited supply. "If people like a drink, they will pay a higher price."

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 19, 2018, with the headline 'Whiskey sour? Importers in China fret over US trade battle'. Print Edition | Subscribe