How Trump’s Tariffs Haunt Kentucky Whiskey Distillers: “We’re Still on Death Row”
Dozens of cases of whiskey Sit Located on the ground floor of the James E. Pepper Distillery in Lexington, Kentucky. Ready to ship, but President Joe Biden Do not work to end the trade dispute that started under the old one President Donald TrumpNone of this goes to thirsty customers overseas.
Owner Amir Pee dreamed of selling James E. Pepper in Europe when he started making these bottles four years ago. He rented space in a warehouse in Europe and built a whole new distribution system. But then Trump launched a series of trade struggles with the European Union. This retaliated by imposing a 25% tariff on American whiskey, making bottles of peas much more expensive for European drinkers.
Peay’s sales in Europe have steadily declined, and over time James E. Pepper lost 75% of his overseas operations. After Biden took office, he wanted a reversal, but like any other exporter, he was disappointed. Biden meets his foreign counterpart this weekend G7 summit In the UK, however, it’s unclear how long tariffs will continue, despite recent signs that US and EU officials will start trade talks.
“We’re still on death row,” Pee said.
The whiskey must have aged at least 2 years to be considered a pure bourbon. James E. Pepper spirits generally take longer.
One of America’s oldest whiskey brands, its production began during the War of Independence and is closely tied to American history. The old-fashioned cocktail was created in honor of Colonel James E. Pepper, and the spirits maker helped pass one of the first federal consumer protection laws, the Bottled in Bond Act. .
The brand and the distillery were abandoned for decades before Peay began to distill his name again in 2008. He, The original land, reopened in 2017, named the flagship label “1776”.
“When we fill barrels with whiskey here today, we predict what we’ll do with it in four years. And we have cleared an unsuccessful stock for Europe. “We made plans and forecasts based on it,” added Pee, an entrepreneur and history buff who came to life after learning about the James E. Pepper brand’s rich past.
Distillation is a long term process. It starts with crushing the grain, which is fermented on the upper floors of the distillery, Pee explained one day this week, dipping his fingers into a bat to taste.
“It’s been cooked for about 42 hours and will be still tomorrow,” he said.
After that it gets stored in an offsite building called Rick House and gets old. In other words, today’s barrels could land on shelves in 2025. But Pee doesn’t know if there is a demand for James E. Pepper whiskey in European bars. At the time he does.
“There is no guarantee that he will regain his momentum. When it loses its place on the shelves, consumers have tried something else, ”he said.
Collateral damage in Trump’s trade war
Trump imposes tariffs on steel and aluminum made abroad, Protect American Producers In 2018, Europe retaliated with whiskey tariffs. Used in other typical American products such as Harley-Davidson motorcycles, peanut butter, and denim.
Targeting whiskey had another political advantage. This has caused distress to industry in Kentucky, the hometown of Republican Senate Leader Mitch McConnell. And Harley-Davidson is based in Wisconsin and was represented in 2018 by former Republican Paul Ryan, who then chaired the House of Representatives.
McConnell is no longer the Majority Leader, Ryan is no longer in the House of Representatives, and Trump is no longer the President – but the tariffs remain. 50% doubled on June 1… A few days ago, the European Union announced that it would postpone its escalation until December, when authorities began. Discussion With its American counterparts on the overproduction of steel and aluminum.
Biden leaves Trump’s tariffs intact
It is ultimately up to Biden to eliminate the tariffs. However, they are now accepted by the US steel and aluminum industry, which is essential to the president’s mission to rebuild domestic manufacturing and national infrastructure. Biden’s commercial director, the office of U.S. Trade Representative Katherine Tai, has not reached a deal. Tackle global excess capacity.
Prices Made steel more expensive For American buyers, this is another success for Peay, who is building a new warehouse at his home. Rising steel prices and recent surges Wood priceIncreased construction costs by over 33% from original plan.
Biden also left Trump’s tariffs intact About $ 350 billion made in China.. While US importers cost billions of dollars to import items ranging from baseball caps to bikes, the new administration is unfair, including the theft of intellectual property and the forced transfer of technology. It continues to take a strict stance on China to engage in business practices.
Still, there were other signals that Biden was trying to ease trade tensions. Earlier this year, he and the European Union agreed Stop for 4 months A long-standing controversy over the tariffs imposed in connection with another file, the appeasement of Boeing and Airbus.
“We are optimistic that the Biden administration is doing everything in its power to resolve these complex business issues,” said Chris, president and CEO of the Distilled Liquor Council. Said Swonger.
There is no doubt that tariffs are holding back US exports, which have been allowed to enter Europe tax-free for the past 20 years. Now the United States is exporting Almost 30% less Whiskey than before the prices.
Brown-Forman, the maker of Jack Daniel’s and the largest exporter of American whiskey, bears around 15% of all tariff bills from Europe and the UK and has been hit hard, CEO Lawson Whiting said. I mentioned this in the financial results announcement in March.
Still, the industry is doing very well overall.
“Although tariffs have been hit hard, national growth and interest in Bourbon are on the other side of the roof and persist,” said the author of “Bourbon: American Whiskey Rise, Fall, and Rebirth” . said Fred Minick.
Whiskey sales up 49% Over the past five years, it has increased over the past year, as bars and restaurants have been forced to close due to a pandemic.
Manufacturers of distilled spirits are subject to higher taxes abroad, while domestic manufacturers of distilled spirits benefit from a tax reduction. Late last year, Congress made permanent the first tax cuts temporarily implemented by the 2017 Tax Reform Act. This will reduce the federal sales tax by $ 13.50, the first 100,000 gallons, to 2.70 gallons. It makes a big difference, especially in small, artisanal distilleries.
“The past year has been a huge success,” said Connor Lennon, university economist. Louisville – But he added, “This is not an argument for tariffs. They want to sell here and there.
Named after a limestone stream running through Lexington, the main ingredient in Kentucky whiskey, the Town Branch Distillery could easily boost overseas exports without tariffs.
Its parent company, Alltech, has a distillery in Dublin, and the Lexington location can leverage its distribution network to expand its international business.
However, tariffs were imposed before increasing exports became an important part of the city branch’s plan.
“We got hurt because we couldn’t grow into our sister business,” said Alan Kennedy, distiller and blender.
So far, Town Branch is also growing at home, making it the only Lexington stop in Kentucky. The Bourbon Trail – and the only trail with an on-site brewery – Rob Class, director of spirits, is optimistic that next year will be as strong as the country opens up.
“We did not lose against Europe. We have lost our chances in Europe, ”said the class. “But we are ready to go when the time is right.”
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