LEXINGTON, Ky. (LEX 18) — Three years ago, the European Union implemented a 25% tariff on Kentucky’s bourbon imports. It was almost certainly retaliatory, and it had an enormous economic impact on the industry and the state.
“The first things they targeted were Kentucky bourbon and Wisconsin cheese,” said Eric Gregory of the Kentucky Distillers’ Association. “Senator McConnell was Senate Leader, and Paul Ryan of Wisconsin was Speaker of the House, so it was clearly political leverage,” Gregory continued.
Mr. Gregory was speaking of the EU’s response to a 2018 President Trump policy that enforced a tariff on imported aluminum and steel. Mr. Trump wanted American companies to buy American steel/aluminum. It wasn’t a damaging idea in theory, but it certainly had a ripple effect, and in Kentucky, it was actually much more significant than a ripple.
“We were about 500-560 million dollars (annually) in exports before the tariffs, and now we’re down in the 200-million-range, so you’re talking about 2-300 million dollars a year,” Gregory explained.
But on Sunday, the EU and United States agreed to suspend these tariffs, and Mr. Gregory believes the suspension will go into effect on January 1.
“A lot of the projects that were paused, or maybe scaled back, I think you’ll really be seeing them coming online,” he stated.
This is good news obviously for the major distillers on the trail, but the boutique distiller could also benefit.
“Before the tariff, we were a little smaller. We’ve grown some, so actually, this will give us an opportunity to, if we want,” said Jeff Wiseman of plans to export his product.
Wiseman is the owner of Lexington’s Barrel House Distilling Company. He knows the tariff suspension will benefit everyone at home and likes that he now has a chance to extend his footprint internationally if he chooses. The tariff made that impossible to even consider. His brand isn’t big enough to make a 25% tariff worth it to anyone in the EU. That tariff, by the way, was expected to rise to 50% on December 1 if Sunday’s deal wasn’t struck.
“It’s a good day!” Gregory said.
Keep in mind, aging bourbon is a 5-10 year process (at least), which Gregory called the blessing and the curse of bourbon. The production relies heavily on long-term economic forecasting. When this EU tariff was implemented three years ago, they couldn’t just stop production and start making only what was needed domestically. Gregory noted that exporting is critical to keeping the production line moving. And as you read above, it’s essential to maintain a healthy bottom line.
Gregory also noted that England, which is no longer part of the EU, will need to relax its tariff too, and he sounds hopeful they will follow shortly.
Congressman Andy Barr, who represents Kentucky's 6th district, called the agreement a "huge boost for distillers" in the state and throughout the nation.
"As Co-Chair of the Congressional Bourbon Caucus, I led multiple letters to both the Trump and Biden Administrations pushing for the full removal of these tariffs," said Congressman Barr in a statement. "I will always be an advocate for enhanced access to international markets for our distillers so that they can provide Kentucky spirits and the world's best bourbon to countries across the globe."