Kentucky's $9 billion bourbon industry caught in the crossfire of Trump trade war

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Kentucky bourbon has become a key pawn in the trade war raging across the globe as President Donald Trump continues his on-again, off-again tariff rollout.

As the trade war escalates with U.S. partners ranging from Canada and Mexico to China and the European Union, some retaliatory tariffs still hanging around from Trump's first administration remain a threat to the bourbon industry.

A 50% tariff on American whiskey products, which include bourbon, rye and Tennessee whiskey, had been set to return April 1 but was delayed by the EU until April 13, providing a slight reprieve for the industry.

The March 20 announcement delaying the whiskey tariff followed a threat by Trump on March 13 of a 200% tariff on alcohol from the EU if it were to go forward with its planned tariff on American whiskey.

"This is a very positive development and gives U.S. distillers a glimmer of hope that a devastating 50% tariff on American whiskey can be averted," Chris Swonger, president of the Distilled Spirits Council of the United States, or DISCUS, said in a statement March 20. "We urge the EU and U.S. to reach an agreement that will return and safeguard zero-for-zero tariffs for spirits trade, benefitting the spirits and hospitality sectors."

The tariff threat is leading to economic volatility for American whiskey, which in turn is rippling through Kentucky as the state's marquee product works to maintain momentum.

"It's obviously bigger than Brown-Forman, and it's bigger than our industry, and every day seems to unfold a different twist on the story," Brown-Forman CEO Lawson Whiting said during the company's earnings call in March. "We're ... shooting to try to get reciprocal zero-for-zero tariffs. That is our key ask. Maybe that's obvious, but to try to keep this industry out of these trade wars."

In Kentucky, Louisville-based Brown-Forman, maker of Jack Daniels, Woodford Reserve 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 exporting Kentucky bourbon companies include Heaven Hill, maker of Evan Williams; Beam Suntory, which produces Jim Beam and Maker's Mark products; and Diageo, owner of Bulleit Bourbon.

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"The EU’s 50% retaliatory tariffs on Kentucky’s signature bourbon industry will devastate distilleries across our commonwealth, which employ over 20,000 hardworking Kentuckians and generate billions for our economy," Rep. Morgan McGarvey, D-Ky., said in a statement March 12.

'We've done this before'

For Kentucky, where bourbon is a $9-billion-a-year industry, the tariff consequences extend beyond the bottles on the shelves.

"Trump's trade war is hurting the farmers who grow corn, coopers who char and fit our white oak barrels, the men and women who work the line in distilleries, and truckers who deliver the finished product," McGarvey said March 20.

In 2018, during Trump's first presidential term, tariffs he levied against the EU on steel and aluminum led to a retaliatory tariff against U.S. products, including American whiskey. Former President Joe Biden was able to negotiate a pause in these tariffs with the EU, but as the deadline on that pause nears, distillers and Kentucky are bracing.

"So we're going to continue to prepare. We've unfortunately, we've done this before," Whiting said in the earnings call. "If it rolls out where they're coming after American whiskey again, and we don't have a situation of reciprocity, then the market for spirits, once again, gets very distorted. That is a big disadvantage for us."

From 1997 until the 2018 tariffs, the U.S. and the EU benefited from zero-for-zero tariffs, which industry groups such as DISCUS and the Kentucky Distillers' Association, along with major distillers, want to see returned.

With the imposition of the EU tariffs in 2018, American whiskey exports to the region plummeted 20%, losing roughly $112 million for the U.S. spirits industry, according to DISCUS. And during the tariff pause negotiated by the Biden administration, the sector saw a bounceback, with exports to the EU surging roughly 60% and drawing in $699 million in 2024 exports.

"Over the past three years that these EU tariffs have been suspended, American whiskey exports to the EU have soared, supporting jobs at U.S. distilleries, as well as local farms," Swonger said March 20.

Canadian response

Most recently, Trump announced he would share a "reciprocal tariff" plan on April 2, giving countries a proposed tariff rate based on their own rates, non-tariff trade barriers and other factors while also providing an opportunity to negotiate around the "tariff wall," Paste BN reported last month.

In early March, Trump reinstated 25% tariffs on Canada and Mexico. Canada was quick to respond and ushered in its own multi-round set of tariffs. The first was issued March 5 and subsequent rounds were set to follow in late March and again in April.

Part of the initial response from Canada included an immediate halt to purchases and the removal of U.S. beverage products, including Kentucky bourbon.

"That's worse than a tariff, because it's literally taking your sales away, completely removing our products from the shelves. ... That's a very disproportionate response," Whiting with Brown-Forman said.

For now, the watch-and-wait game for distillers and Kentucky continues.

"It’s not just that bottle of bourbon, it's all that it takes to make that bottle of bourbon, to get it to where it needs to go, and everybody that touches it in between, including bottlers, distributors, and you name it," state Sen. Gerald Neal said on CNN News Central March 17. "Everybody gets affected. It's a big deal in Kentucky."

Contact business reporter Olivia Evans at oevans@courier-journal.com or on X, formerly known as Twitter, at @oliviamevans_.