Tariff increase on Kentucky bourbon exports delayed for at least another year

A 50-percent tariff set to hit the American whiskey (and bourbon) industry on January 1, 2024, has been delayed for at least 15 months, the European Union announced Tuesday. 

“The European Union has today announced its decision to extend until 31 March 2025 the suspension of its rebalancing tariffs on US products in the context of the steel and aluminum dispute,” the EU said in its release. “Initially implemented during the Trump Presidency, the EU rebalancing tariffs on US exports were a response to the US “Section 232” tariffs on steel and aluminum.”

Included in the EU’s rebalancing of tariffs was a hike on American whiskey exports, first implemented in 2018. From 2018-2021 when added tariffs were in place, American whiskey exports dropped 20 percent, according to a letter submitted earlier this month to the U.S. Trade Representative from a bipartisan group of 17 U.S. Senators.

These efforts to delay or temporarily pause the EU’s whiskey tariff first came in 2022 when the American spirits industry rebounded over 2017 pre-tariff levels.

The Kentucky Distillers’ Association (KDA) issued a statement Tuesday supporting the efforts of those who fought to further delay the EU’s tariff and encouraging officials to reach a permanent solution.

“We strongly urge E.U. and U.S. officials to permanently end the tariffs sooner than later. Our signature industry has worked hard to recover and regain footing from the last short-term suspension of tariffs. As Bourbon takes years of aging to perfect, a permanent solution will bring certainty to our distillers as they look to continued growth and investments in international markets,” the statement said.

The suspension of tariffs comes on the heels of an announcement from the KDA last week citing steady growth and record taxes for the industry in the Commonwealth. The KDA went on to applaud the efforts of the Kentucky General Assembly in passing House Bill 5, to gradually provide tax relief for the distilling industry.

“The bipartisan House Bill 5 compromise signed into law earlier this year phases out the barrel tax over 20 years while protecting funds for schools, fire departments and EMS districts, and gives local governments plenty of time to plan and diversify their tax base,” according to the KDA’s release.

House Bill 5 in the 2023 legislative session was a major priority for the Kentucky Chamber of Commerce.

“Everyone recognized the astonishing tax liability distillers are facing is unsustainable and would be for any business,” said Kentucky Chamber of Commerce President and CEO Ashli Watts. “Without our signature industries like Bourbon, Kentucky will lose. We applaud our elected officials in Frankfort who have embarked on a winning strategy to set Kentucky up for the future. From record economic development to tax reform to rethinking how we retain businesses and employees; they are doing the hard work – including last year’s bipartisan House Bill 5 compromise – to strengthen Kentucky for generations to come.”