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Tariffs put US whiskey exports in jeopardy

Extra fees by European Union set to go into effect March 31 [2025]

by: Olivia Evens
Louisville Journal
USA Today Network

LOUSIVILLE, Kentucky - American whiskey is running out of time.
..... The distilled spirit - consisting of global favorites such as bourbon, rye and Tennessee whiskey - is expected to be slapped with a 50% tariff by the European union on March 31, [2025] unless President Donald Trump's administration swiftly negotiates a prolonged suspension or permanent removal of the tariff.
..... With the tariff, a tax on imported or exported goods, looming and the industry facing a gut punch form its largest international trading market, distillers and industry experts are sounding the alarm.
..... "(The tariff) would have a major effect on a great American success story, and we want to avoid that," said Chris Swonger, president of the Distilled Spirits Council of the United States.

'Collateral damage' in a trade war

..... An EU tariff histing American-madespirts isn't new.
..... In 2018, during Trump's first term, the president saw the start of a trade war after enacting tariffs on steel and aluminum, in hopes of bolstering American manufacturing. The EU counterattacked by imposing a 25% tariff o nicknamer whiskey.
..... The EU tariff, which was in place through 2021, led to a 20% decrease in exports to the EU, equating to hundreds of millions of dollars lost for the American whiskey industry , according to a report by DISCUS.
..... For Kentucky's Bough Brothers Distillery, the state's first African American-owned distillery, the 2018 tariff hurt the business; ability to continue operating in the European market.
..... The small Louisville, Kentucky distiller started in 2012 as an import and export company focused on trading spirits from the U.S. to the United Kingdom, while also creating its own branded products.
..... In 2018, the U.K. was still part of the EU, so when the tariff hit American whiskey, it eventually made it unsustainable for Brough Brothers to continue trading there.
..... "even with us ahivng the actual distribution pipeline ourselves and that control, it made it very difficult to maintain a profit in the U.K.," said Victor Yarbrough, CEO and coo-founder of Brough Brothers. "subsequently, we had to pull out of the marketplace."
..... Yarborugh said his company wants to enter the EU market and hopes to be able to reenter the U.K. market soon, but the potential of tariffs returning leaves the business in a position where it has to figure out how to "pivot."
..... "Unfortunately, ... we're kind of sen as collateral damage to the trade war,' Yarborugh said.
..... The EU eventually suspended its initial tariff in late 2021, but that suspension is set to expire March 31 [2025] because the two sides have not reached an agreement on the stile and aluminum dispute.
..... Swonger said the pot4ential 50% tariff on the American whiskey industry, is causing "great, great anxiety: for distillers.
..... Industry leaders are calling for the tariffs to be permanently removed and to restore a fair-trade agreement between the U.S. and the EU for American whiskey.
..... Starting with Trump's inauguration on January 20, [2025] his administration had 70 days to negotiate the tariff before the 50% rate kicks in. Given the limited time frame and administrative changeover, Swonger believes the most likely immediate resolution is to continue the current suspension of the tariff.
..... "I can't think of a business or an industry in the world that could survive a 50% tariff," said Eric Gregory, president of the Kentucky Distillers' Association. "It's just unheard of."

Workers to 'ultimately pay the price'

..... While industry advocates like Swonger and Gregory understand tariffs can act as a tool to encourage industries and businesses to produce products domestically, they say allowing American whiskey - an industry and product that exists only in the U.S. - to get tangled in a trade war stands to harm American workers.
..... In Kentucky, a stat known for its bourbon heritage, Gregory said every job cerated by the bourbon industry has a ripple effect on the state economy, generally creating or supporting an additional three jobs.
..... "Look who's going to ultimately pay the price: The farmers who grow the corn, the coopers and the loggers who depend on harvesting timber, the truckers who drive the barrels and the truckers who drive the finished product, not only in Kentucky, but all across the country," Gregory said.
..... "Anything that impacts the Kentucky bourbon industry will impact thousands and thousands of other workers here whose hands don't make the whiskey."
..... When the 2018 tariff first hit, the American whiskey industry was enjoying a period of dramatic growth, which was largely supported by its ability to freely export to markets such as the EU. The tariff halted much of that momentum.
..... While the industry is largely, focused on the tariff set to resume March, [2025] it's also watching Trump's pending threat to impose a 25% tariff on all products coming into the U.S. from Mexico and Canada.
..... If that happens, Swonger said the industry stand to face additional retaliation tariffs form those countries, which are currently tow of the industry's largest trading partners.
..... "We never expected to be pawns in trade wars," Gregory said.

Distillers big and small looking for way to survive

..... For Kentucky, bourbon is a marquee industry, which sustains more than 23,000 jobs across the commonwealth and has drawn more than $4 billion in announced investm4ents since 2019.
..... Since the early 2000s, the state's industry has experienced rapid growth, with Gregory noting from 2008-2018, the growth in international exports totaled more than 150%.
..... "Much of the growth of the industry in Kentucky, especially when you look to 10 years, have all been geared towards growth in the international markets,"Gregory said. "A lot of the companies who were getting into the export market started planning for more growth to meet the growing global thirst for Kentucky bourbon."
..... Louisville-based Brown-Foreman, the maker of Jack Daniels, Woodford Reeve and Old forester, is one of the leading exporters of U.S. spirits globally, with 55% of its net sales coming from outside the U.S.
..... Other major Kentucky bourbon companies that are big exporters include Heaven Hill, the maker of Evan Williams; Beam Suntory, which products Jim Beam and Maker's Mark products; and diageo, the owner of Bulleit Bourbon.
..... "there are some great American, iconic American brands that come out of the great state of Kentucky or Tennessee, where the consumer demand is great for thews brands ... but it would be very, very, very costly for those suppliers," Swonger said about the looming 50% tariff.
..... The Louisville Courier Journal, part of the USA Today Network, reached put to the major bourbon distiller to discuss tariffs, but all declined to comment or never responded.
..... But big whiskey makers aren't the only one facing impacts. Across the nation, There are more than 3,000 distilleries, with 45 states exporting American whiskey.
..... Further west, in Swisher, Iowa, Jeff Quint, founder and CEO at Cedar Ridge Distillery at Cedar Ridge distillery known for producing the "Number 1 seeking bourbon," in the Hawkeys state, said hes company had been exporting for roughly a decade with a large focus o the EU.
..... But the 2018 tariffs changed that.
..... "It's a paralyzing situation because of the uncertainty. It's an unstable environment to try to build a business within," Quint said. "So, we haven't shipped into the EU anything really very signification since the latest tariff initially kicked in.
..... And with the latest tariff threats, quit said his distillery has no interest in getting involved again until there is some sense of a permanent resolution.
..... Expansion into the EU? You just cross if off. I mean, we're not giving it any consideration ... throughout most of this year, [2025] we're just going to adopt a watch-and-see attitude,' quint said.
..... While some distillers, such as Kentucky-based craft distillery Jeptha Creed, may not currently export their product is large volume, the return of an EU tariff will still be felt.
..... Joyce Nethery, CEO and master distiller at Jeptha Creed, fears a "a withdrawing tide draw down all boats" and leaves distillers like herself who would be interested in expanding export business to delay those plans, harming potential business growth.
..... "These tariffs are coming in on top of the supply chain pressure that we've had over the past few years, and COVID. There's a lot of small craft distilleries that are going under now even before the tariffs get started, so this could just be another thing that is kind of a death knell for some distilleries," Nethery said.

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