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WTF is going on with all these Tariffs?!
TL;DR the US is now charging a 10% tariff on both goods and shipping, which is shown at checkout so there’s total clarity on what you’ll pay and there are no extra hidden fees. What you see is what you’ll pay.
In short, president Trump believes the USA has been getting a raw deal since the Second World War because they’ve been covering most of the cost of maintaining the post war world order and at the same time running up massive trade deficits because (he believes) other countries have put up both tariff and non-tariff barriers against American goods to protect their home markets.
So he’s implemented huge (but varying) tariffs on pretty much everyone in order to redress the balance of trade. Each tariff is a simple function of the trade deficit in goods with that country, so a larger deficit means a larger tariff.
In round 1, everyone got a 10% tariff plus a bonus tariff of between 10% and 25% for most countries, so almost everyone in the US was paying between 10% and 34% more on anything they bought from a US trading partner.
That lasted only a few days, because the global stock market crash made basically everyone shit themselves and call on Trump to take it easy.
So the bonus tariffs were rolled back (round 2) but the base 10% tariff remained in place. So when president Trump says “tariffs have been paused” he means “part of some tariffs have been paused” because that 10% is still there.
Shipping
Here’s a fun thing – it turns out the 10% tariff also applies to shipping! So not only do you get to pay an extra 10% on top of the price of goods, but you get to enjoy an extra 10% on the cost of shipping also.
That means if the shipping costs half as much as the bottle (which it often does, because shipping is wildly expensive now) you’re effectively paying an extra 15% on top of the price of the bottle.
So that sucks.
But wait, there’s more!
If all that sounds a bit too simple to you, don’t worry – there’s more!
The tariff is not based on where the product was shipped from (the UK), but on where it was made, so Kavalan had a 32% tariff (although now down to 10%).
What does that mean for dram sets and calendars? You had to ask…
It means some poor sod has to spend about 500 hours working out the tariffs on every dram in every set only to have all the tariffs change again the next day. Pity him.
Who pays these tariffs anyway?
While the spin here is very much that the companies selling to America will pay these tariffs, the reality is that this is just a consumption tax on American businesses and consumers.
Because the tariffs apply equally to all the competing retailers in the UK, it just lifts costs evenly for everyone, so any competitive dynamics are unchanged – anyone who had the space to reduce prices would have already done so, and the addition of a tariff makes no difference to the cost/benefit of doing that.
At any rate, no company can afford to just take a 10% discount and keep trucking – competition means prices are already pretty close to as low as they can be for most things, so nobody is absorbing these – everything is just getting 10% more expensive for anyone living in America.
So these really are just a new consumption tax on all American consumers and businesses.
So what’s the purpose of all this?
The stated goal is to redress the trade deficit by forcing global companies to move manufacturing to America because it's the only way to serve the American market cost effectively.
Another stated goal is to raise a lot of additional tax revenue so other taxes can be reduced.
At best one of those can be met in the long term as they’re somewhat mutually contradictory, but maybe in the short term it raises a load of tax and in the long term it forces companies to onshore manufacturing.
Will this work?
How the hell would we know?! And if you’re getting your economic forecasts from a whisky website then you’ve probably got bigger problems in your life ;-)
Most economists are convinced that tariffs hurt both parties in a transaction (weirdly this view doesn’t seem to translate to also being against income tax) so the effect will be terrible for everyone including America.
But economists are pretty shit at forecasting, so who knows – maybe the second and third order effects of this will indeed line up to be in America’s interests. Maybe all this is just posturing and there will be a flurry of deals and in a few months all this talk of tariffs will be old news and we’ll be onto the next thing.
We can only hope.
Until then, our American friends are sadly stuck paying an extra 10% on both goods and shipping. Sorry about that.
Cheers,
Your friends at Master of Malt
P.S. You might have seen some other retailers charging a little bit less for shipping than we do and wondered to yourself “how do they do that”?
The answer is crime! These guys are effectively smuggling stuff into the country by misdeclaring the contents of the packages they send to avoid US customs duties and tariffs
Is that a good idea? Who knows. Maybe. There has to be some risk to it though, and we have no idea what the consequences for either the company shipping the goods or the customer ordering will be when you ask when US authorities find out, but presumably they’re not going to be *delighted*…
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