Whiskey, Brexit, and the Trade War

Abstract

In 2020, the UK officially withdrew from the EU (Brexit), ending its obligation to continue the EU’s retaliatory tariffs on U.S. products. Recent actions by the UK government suggest that these retaliatory tariffs will eventually be eliminated. We present a dynamic modeling framework and estimate whiskey demand in the UK by source (e.g., U.S. whiskey, Irish whiskey, etc.). Estimates are then used to simulate the impacts of the retaliatory tariff on U.S. whiskey. If the tariff is eliminated, U.S. whiskey exports to the UK should fully recover and could even exceed pre-trade war levels.