Trump Will Be a Catastrophe for the Bourbon Industry

Good quick hit about the problems facing Kentucky’s bourbon industry:

“We’re very worried about what tariffs could do to our industry,” said Eric Gregory, president of the Kentucky Distillers Association, to a committee hearing in Frankfort Thursday afternoon.

In Dec. 2023, the European Union suspended the whisky tariff until March 31, 2025. From 2018 to 2021, tariffs on the industry hit 25, causing American whisky exports to decrease by 20 percent.

Gregory said the concern this time around is that tariffs could hit as high as 50 percent.

“It will cripple our exports industries, and at that point, we’ve never had that problem before, but I cringe to think what could happen with more whisky from a domestic standpoint that may hurt our smaller craft distilleries,” said Gregory.

Because of the nature of the product bourbon distillers need to plan way ahead in terms of production and storage capacity. If an exogenous shock suddenly reduces the demand for bourbon, distillers are left with stock that cannot be moved and that is expensive to maintain and store. Add to this that many distillers have become dependent upon tourism for a substantial portion of the bottom line, and there’s the potential for real suffering. Distilleries in Kentucky are primarily in rural locations so it’s been tough to navigate the politics between pressures from the workforce and the overall political interests of the industry.

Sharp-eyed analysts will note, however, that there is a pathway to the domestic availability of plentiful, inexpensive bourbon in the medium term.