The Kentucky Chamber hosted a webinar this week featuring Vice President of Policy Charles Aull and Erica York, Vice President of Federal Tax Policy at the Tax Foundation, to explore how tariff and tax policies in Washington are shaping the economic landscape for Kentucky businesses.
York opened the discussion by summarizing the current policy environment, explaining that there are two sets of tariffs: sector-specific tariffs on items like steel and aluminum and a newer set of broad reciprocal tariffs currently under legal challenge. “Either way the court rules,” York said, “we are looking at a historically significant increase in tariffs—something that really hasn’t been seen for generations.”
According to Tax Foundation analysis, America’s average effective tariff rate is now the highest it has been since the 1940s. The impacts of the tariffs represent the largest U.S. tax increase since 1993.
She noted that while tariffs are paid by importers, they result in higher costs across the U.S. economy. The Tax Foundation’s analysis shows that if all proposed tariffs take effect, long-run GDP could shrink by almost 1% and employment could fall by more than 700,000 jobs.
York noted that some industries benefit from tariff protections, but they negatively impact other areas. She added that small businesses are especially vulnerable, lacking the cash flow and regulatory experience that help larger firms absorb the impact.
The discussion also covered the House-passed federal tax bill, which would extend several key expiring tax cuts and temporarily boost provisions that support investment and innovation. “Our modeling shows right now that if the tax package as passed by the House is enacted, it would boost long-run GDP by about 0.8%,” York said. The bill is also estimated to create nearly 1 million jobs.
She emphasized that uncertainty remains for the business community. “Right now, it’s all up in the air,” she said, noting that many companies are pausing major decisions until there is greater clarity on trade and tax policy.
The Kentucky Chamber will continue tracking these developments, as many tariffs are in the court system, and the Senate is considering and working on changes to the “Big Beautiful Bill.”
For more information and research, visit kychamber.com/research.
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