With on-again, off-again tariffs imposed by President Donald Trump on a number of products — including distilled spirits — and against numerous nations, only one thing is certain for Kentucky distillers: continued uncertainty.
After imposing 25% tariffs on most goods imported from Canada and Mexico, and 10% on goods from China in February, retaliatory tariffs were quickly announced, followed then by a pair of pauses on both sides. This pushed the tariffs out until early April.
In Kentucky, where bourbon is king and steadily winning world market share, there is concern as to how the situation would affect the state’s native product and everyone involved in the industry. Asked recently if tariffs are currently the No. 1 concern for the state’s bourbon industry, Kentucky Distillers’ Association (KDA) President Eric Gregory replied with a single word: “Easily.”
Trump imposed tariffs during his first term as well, beginning in 2018. It didn’t go well for American spirits producers. Due to European Union retaliatory tariffs from 2018 to 2021, American whiskey exports to the EU — the largest American whiskey export market — decreased 20%, from $552 million to $440 million, The Distilled Spirits Council of the United States (DISCUS) reported.
After Trump left office and the tariffs were suspended the past three years, American whiskey exports to the EU rose nearly 60%, climbing from $439 million in 2021 to $699 million in 2024, DISCUS reports. And this time around, Trump’s tariffs threaten to be even higher than in his first term: He has threatened a 200% tariff against European spirits and wine.
So far, Kentucky distilleries seem steadfast. Green River Distilling laid off 25% of its workforce in March, but said it had nothing to do with looming tariffs. Meanwhile, Buffalo Trace recently completed a years-long $1.2 billion expansion and Master Distiller Harlan Wheatley promises continued methodical growth to satisfy world demand.
“Things keep getting delayed and postponed, which keeps us cautiously optimistic that some deals will get worked out,” Gregory said. “But I will say the 200% threat from President Trump recently worked up a lot of people, including us, in terms of how this impacts the global whiskey family.”
Far-reaching effects
A tariff is a tax charged to American companies when they import certain foreign goods; the goal with such a tariff is to grow domestic markets wherein these companies would purchase or manufacture American-made products to avoid the cost of tariffed imports.
In the long run, this theoretically would create new American jobs and strengthen American manufacturing and the national economy. But creating new or expanding existing manufacturing capacity to build American-made products is a years-long process
Ultimately, however, what usually happens — at least in the short term — is that companies pass added tariff costs on to consumers, making prices for goods higher and damaging the economy in the process.
And there’s another problem with this strategy when it comes to many products, such as spirits, and perhaps most of all Kentucky bourbon: Bourbon can only be produced in the United States, just as Scotch can only be produced in Scotland, Canadian whiskey can only be produced in Canada and Irish whiskey is only produced in Ireland. In other words, slapping a tariff on such a specific type of whiskey can only increase prices, stifling exports and imports, costing companies large amounts of money and costing Americans jobs.
“You can’t make bourbon anywhere else in the world except the United States,” Gregory said. “We’re not going to offshore those jobs – we can’t. Just like Scotch whisky and Irish whiskey can’t. One of the points we’ve been making with world leaders is that we’re kind of collateral damage in all this. Since we’re all distinctive products of our own countries, those jobs aren’t leaving, so if there was a way we could get carved out of this, that would be beneficial.”
Trade war casualties
The negative effects travel even farther when you consider that many of the larger Kentucky distilleries are owned, at least in part, by international spirits conglomerates that also sell other spirits and even wine. Those foreign financial aspects of Bacardi, Diageo, Beam Suntory, Pernod Ricard and others are a strength for Kentucky bourbon industry in times of trade peace but become a weakness when tariffs come into play.
“I’m not sure people understand that we are fortunate in Kentucky to have the biggest spirits companies in the world heavily invested in Kentucky bourbon,” Gregory said. “When you start the tit-for-tat tariffs, these companies are taking two, three, four hits, depending in which way their exports are heading.”
And the retaliatory tariffs weaken Kentucky bourbon as well.
Already, one consequence of the U.S. tariffs placed against Canadian spirits is that it prompted most provinces to pull Kentucky bourbon off store shelves. Andrea Wilson, the chief operating officer at Michter’s Distillery, told NBC News that the distillery has lost $115,000 already in canceled Canadian exports.
The fear is that this is just a start and that tariffs will weaken relationships within the global whiskey economy that have been decades in the making.
“If we’re not selling to our largest export market, that’s a significant impact to our business, and it’s very sad for us, because we have friends, we’ve built relationships in that country for a long time,” Wilson told the news outlet.
“You’re not going to find a better success story than Kentucky bourbon when it comes to trade agreements and exports or when it comes to growth, period,” Gregory concurred.
He points out that the global whiskey industry is historically cooperative or, as Gregory worded it, “symbiotic.”
“Especially with the Scotch industry,” he said. “We’re part of a global whiskey family. We send $300 million worth of barrels to Scotland every year (for use in aging scotch). Anything that impacts our production here has an impact on them.”
Now what?
What to do to prevent the tariffs from lingering and causing the feared damage is somewhat uncertain. Will an effort be made by world leaders? Or will that tit-for-tat approach countries have executed thus far become a long-term stand-off, creating a full-blown, crippling trade war?
That remains to be seen. Advocacy organizations are trying their best to bring awareness to the fears they have for the spirits industry.
“The U.S. spirits sector supports more than $200 billion in economic activity, 1.7 million jobs across production, distribution, hospitality and retail, and the purchase of 2.8 billion pounds of grains from American farmers,” DISCUS President/CEO Chris Swonger said in March. “We urge President Trump to secure a spirits agreement with the EU to get us back to zero-for-zero tariffs, which benefits the hospitality industry and U.S. craft distillers who export their products.”
Shortly after Trump won the presidential election and began promising tariffs, DISCUS collected 13,000 signatures in a petition urging the federal government not to impose tariffs on distilled spirits. By late March, DISCUS doubled down on its pleas, working with the Toasts Not Tariffs Coalition and more than 50 other advocacy groups to raise more signatures through an online petition tied to a letter that will be sent directly to the White House.
There is a glimmer of hope. India had imposed 150% tariffs on bourbon for years, making it next to impossible for Kentucky distilleries to crack that market. However, in February, Trump and Indian Prime Minister Narendra Modi reached an agreement to lower India’s tariffs on bourbon to 100%.
The KDA praised the agreement at the time, with Gregory calling it “a historic accomplishment.”
He explained to The Lane Report that not only does a tariff raise prices and cost jobs back home, but it also damages the bourbon industry’s reach into other countries. Long-term investments will be lost in the wake of tariffs, he said.
“India had had a 150% tariff on bourbon for a long, long time,” Gregory said. “That is a brick wall for us trying to get more people in India enjoying our products. Just lowering that tariff from 150% to 100% is a foot in the door. If we can get that down to 50% or less, now you’re talking about distilleries willing to spend more money to convince those consumers to switch from drinking their brand to Kentucky bourbon.”
To lose even part of an international audience can be a huge blow, given that there is significant investment in marketing American products to other countries. Even with the reduced Indian tariff, it will take time and investment to win over an audience there.
“It takes years and years and years to build a brand,” Gregory said. “It’s not like we can just drop in and hope an entire generation of people raised on drinking something different are going to switch to something they haven’t tried before.”
High tariffs on the EU, Canadian and Mexican markets threaten to do similar damage if the trade war should linger for years: “Now you lose them for an entire generation,” Gregory said.
Kentucky’s lawmakers have spoken out against the tariffs.
“I’m not a fan of tariffs,” Kentucky Sen. Mitch McConnell said in Washington on March 18. “I hope it works, but if it goes on very long, we’ll have more of what we’ve already experienced in Canada with taking bourbon off the shelves. American farmers — we have 70,000 farmers in Kentucky — basically make their money off of trade export, so I think a long-term trade war would be a mistake.”
“Mitch McConnell’s saying it,” Gov. Andy Beshear told the media in early March. “Rand Paul has said it. When you have the two Republican senators and the Democratic governor all saying something’s a bad idea, it’s because it’s a bad idea.”
What will ultimately happen will simply have to play out. But for his part, Gregory has one definitive statement: “We just want to drink whiskey.”
