LOUISVILLE, Ky. (WDRB) -- An international trade war over steel and aluminum has soured Kentucky’s bourbon industry for the last two years, but distilleries are hopeful after negotiations resulted in a temporary relief.
Exports of Kentucky bourbon and American whiskey plummeted in the last couple years because of a 25% tariff. The trade war started in 2018 when former President Donald Trump put tariffs on incoming steel and aluminum. The European Union hit back by taxing all American whiskeys.
“It has dragged in a lot of industries that don’t have anything to do with steel and aluminum, like Kentucky bourbon, with retaliatory tariffs,” said Eric Gregory, president of the Kentucky Distillers’ Association.
The 25% tariff was set to double on June 1, which Gregory said “would’ve been a devastating blow to our industry.” However, President Joe Biden’s administration is now negotiating with the European Union and the United Kingdom. And in the meantime, it was announced Monday that the nations reached a temporary agreement to hold the tariff at 25%.
“It is fantastic news that they’re at the negotiating table,” Gregory said. “Twenty-five percent was bad. But we’re thrilled to be staying here, because 50% would’ve been crippling.”
Since the tariffs kicked in, Kentucky’s bourbon exports are down 35% globally and down 50% to the EU, which is the commonwealth’s largest market, Gregory said.
“Kentucky traditionally had exported between $500-600 million worth of product each year," he said. "And that’s taken, as you can imagine, a massive hit."
If a distillery can’t absorb the tax, the added cost passes to the consumer. The less demand other countries have for Kentucky’s bourbon, it impacts distillery profits and jobs. Gregory said the EU made up over 50% of all Kentucky exports before the tariffs started in 2018. That was slashed to 40% in 2020.
Kentucky U.S. Congressman John Yarmuth is encouraging the Biden administration to continue working with the EU and UK to completely remove the tariff. Gregory hopes the negotiations lead to having a free trade agreement again.
“It has been a nerve-wracking three years, but progress is being made. So we’re thrilled,” he said. “We’d like to get back to free and fair trade and doing what we do best, which is crafting the world’s finest bourbon.”
Copyright 2021 WDRB Media. All Rights Reserved.
