The deal, signed during the Prime Minister’s visit to Beijing, is estimated to be worth £250 million ($344 million) to the UK economy over the next five years. China is currently Scotch whisky’s 10th largest market by value, and the tariff reduction will help Scottish distillers compete more effectively.

Those operating within the Scotch whisky industry view the move as a positive step towards improving market access in one of the world’s most important premium spirits markets, at a time when global trade conditions remain volatile. It follows the UK-India trade deal which cut Indian import tariffs on Scotch; it is estimated that it will increase sales to India by up to £1 billion a year. That deal is expected to grow the Scottish economy by £190 million annually.

While seemingly a "niche" area, exports of whisky to China – a country that has a thirst for the product – is important for the UK at a time when the domestic economy has been lacklustre. China became the world’s fourth largest whisky market by value in 2023 – up from sixth in 2022, according to China-Britain Business Focus in May last year. It cited figures from Euromonitor International, stating that China's whisky sales are expected to double from £920 million in 2023 to £1.8 billion by the end of 2025. In 2022, Asia overtook the European Union in whisky sales.

Starmer's visit to China was designed to improve relations with the Asian giant at a time when they have been fraught at times, for instance over accusations of China spying on the UK, and its domestic human rights record. It is a difficult balancing act for Starmer; the government is trying to diversify its economic relations as those with the US have turned more difficult amid arguments between London and Washington DC over President Donald Trump's stance on Greenland. Trump has also reportedly criticised the UK for enabling China to build a large new embassy in the City of London, and the UK's agreement to transfer ownership of the Chagos Islands in the Indian Ocean to Mauritius, and potentially open up the territory to Chinese influence.

However, the prospect of more whisky sales appears to have drawn cheers from the Scottish sector.

“Our whisky distilleries are the jewel in Scotland’s crown. Having already slashed tariffs on whisky exports to India, we’re now doing the same with China – proof that our pragmatic, hard-headed international engagement brings benefits at home,” Starmer said.

“The reduction in tariffs on Scotch whisky from 10 per cent to 5 per cent is a significant diplomatic win and a meaningful signal at a time when global trade conditions remain unpredictable,” Paul Kopec, CEO of whisky asset management firm (SWA), who said China is a priority growth market for many Scotch whisky producers, which in recent decades has developed into a knowledgeable and premium focused market with a strong appreciation of Scotch.

“This is another tremendous result delivered by the UK Government for Scotland’s world-renowned whisky industry. From Delhi to Beijing, this government is opening doors for Scottish exporters and putting money in the pockets of working people across Scotland,” Secretary of State for Scotland Douglas Alexander said.

Other aspects of the deal
In the energy sector, British firm Octopus Energy is entering the Chinese market through a partnership with local company PCG Power to develop a digital platform for trading electricity. The project aims to improve efficiency in the power system and support China's efforts to increase the use of renewable energy.

The reset also secures access for Chinese exporters of high-value goods such as electric vehicles, solar panels and clean energy, while creating opportunities for Chinese investment in British services, finance and green tech.

The move comes after Canada and China struck a trade deal earlier this month. Under the move, China’s president Xi Jinping and Canadian prime minister Mark Carney announced lower tariffs. China is expected to reduce levies on Canadian canola oil from 85 per cent to 15 per cent by 1 March, while Ottawa has agreed to tax Chinese electric vehicle imports at the most-favoured-nation rate of 6.1 per cent. Carney has been trying to diversify trade away from the US, following the uncertainty caused by Trump’s on-off tariffs. The deal could also see more Chinese investments in Canada. See more here.