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Kentucky bourbon boom could be slowed by Trump tariffs on steel and aluminum

Barrels of bourbon, such as these aging barrels at Buffalo Trace in Frankfort, hit a tax-assessed value of $3 billion in Kentucky in 2017. The industry paid $23 million in taxes. Another 1.7 million barrels were filled last year.
Barrels of bourbon, such as these aging barrels at Buffalo Trace in Frankfort, hit a tax-assessed value of $3 billion in Kentucky in 2017. The industry paid $23 million in taxes. Another 1.7 million barrels were filled last year. teblen@herald-leader.com

The European Union and Canada plan to take trade swipes at bourbons and whiskeys in retaliation for President Donald Trump's decision Thursday to impose tariffs on steel and aluminum imports from their countries and Mexico. The move could put a crimp in Kentucky's bourbon boom, officials say.

The industry, which has enjoyed an uptick in bourbon tourism in recent years, had hoped to avoid the tariffs placed when they export U.S. liquor to Europe and Canada. Senate Majority Leader Mitch McConnell, a Kentucky Republican, warned Trump that imposing tariffs on the metal imports could spark a trade war.

But European Commission President Jean-Claude Juncker said the administration’s decision "leaves us with no choice" but to take its case to the World Trade Organization and impose "additional duties on a number of imports from the US." That would include bourbon, whiskey and other politically targeted goods like Harley-Davidson motorcycles manufactured in House Speaker Paul Ryan's home state of Wisconsin.

McConnell in March warned the White House that there was a "lot of concern among Republican senators that this could metastasize into a larger trade war." A spokeswoman for McConnell said Thursday he had heard from people across the state about the potential rise in the cost of exports and would continue to raise it with the White House.

"The leader has been clear that a trade war is not in the best interest of Kentucky’s economy and that there are better ways to address trade imbalances," spokeswoman Stephanie Penn said, adding that McConnell "will continue to raise his concerns directly with the president and his team."

House Ways and Means Chairman Rep. Kevin Brady, R-Texas, called for the administration to come before lawmakers to explain the effects of the tariffs on local businesses.

"It hurts our efforts to create good-paying U.S. jobs by selling more ‘Made in America’ products to customers in these countries," Brady said.

White House officials said Trump is looking to protect American steel and aluminum.

During a joint press conference with the Prime Minister of Sweden, President Trump reiterated his plan to implement tariffs on steel and aluminum.

"They’re critical for national security," Deputy Press Secretary Raj Shah told Fox News. He said Trump had worked to exempt certain countries and certain allies, "but in these instances it wasn’t possible and so the president took action.”

U.S. producers say bourbon, which has become a tourist attraction in Kentucky, has caught on globally: exports to the European Union totaled $154 million in 2017, up from $128 million in 2016. Total U.S. spirits exports to the EU were $789 million in 2017, with whiskey accounting for approximately 85 percent of that total or $667 million, according to the International Trade Commission and the Distilled Spirits Council.

Producers on Thursday held out hope that the situation could be resolved in trade talks before the tariffs are expected to be imposed in mid-June.

"We remain hopeful that continued negotiations will avoid a costly trade war and protect our allies and partnerships around the world, which will continue to benefit spirits producers and consumers for years to come," Kentucky Distillers’ Association president Eric Gregory said in a statement.

The association estimates bourbon is an $8.5 billion industry in the state, generating 17,500 jobs with an annual payroll of $800 million. Spirits production and consumption generates more than $825 million in federal, state, and local tax revenue.

Canada also included whiskeys in a list of retaliatory measures. Several Kentucky distilleries also produce whiskey.

Prime Minister Justin Trudeau said the moves were not aimed at hurting Americans: "We have to believe that at some point their common sense will prevail," he said. "But we see no sign of that in this action today by the U.S. administration."

Lesley Clark: 202-383-6054, @lesleyclark
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