Kentucky
Here’s how Trump tariffs on Mexico, Canada could impact Kentucky businesses
Brough Brothers Distillery CEO talks looming tariffs
With a 50% tariff set to hit U.S. whiskey by March 31, distillers like Brough Brothers in Louisville, Ky., look to minimize the impact.
- President Trump has ensured the reinstatement of a 25% tariff on Canada and Mexico, at 12:01 a.m. Tuesday, reversing a monthlong pause.
- The tariffs are expected to significantly impact Kentucky’s bourbon and automotive industries, potentially leading to job losses and price increases.
- The bourbon industry faces uncertainty as retaliatory tariffs from Canada and the EU could harm exports and disrupt supply chains.
- The automotive industry is grappling with the tariffs’ impact on production costs and supply chains, with some experts predicting delays in domestic production.
Following a monthlong pause, President Donald Trump has reinstated 25% tariffs on Canada and Mexico, beginning March 4. In addition, a 10% tariff that was initially implemented on China in February will now increase by 10%.
While speaking in the White House Monday afternoon, Trump said there is “no room left” to negotiate on tariffs with Canada and Mexico, reassuring the tariffs will start at 12:01 a.m. Tuesday.
Trump initially imposed a 25% tariff on Canada and Mexico in February, sending sweeping concern across the nation about potential job loss and impact to certain industries, including Kentucky bourbon. However, the countries reached an agreement for the tariffs to be paused for 30 days to allow for further negotiations.
That time is now up.
Monday saw stocks plummet, including for brands with deep Kentucky ties, like Brown-Forman and Ford, with many investors signaling concern as the tariffs remain hours away from return.
“Due to the uncertainty surrounding the tariffs, the stock market has erased the gains from the ‘Trump bump’ following the presidential election, and the expected upward pressure on prices is giving investors pause,” Gustavo Flores-Macias, a professor of government and public policy at Cornell University, told the Courier Journal.
Consumers could see price bumps on goods within a few days as the tariffs go into effect. Prices for some goods, such as cellphones, clothes, and household goods are likely to increase, according to the Washington Post. Additionally, grocery items including vegetables, grains, bakery items and more, could also see price increases.
“The U.S. economy is larger and can better absorb the negative consequences of a trade war, but a simultaneous trade war with its three main trade partners, once tariffs against China are included, will affect all parties negatively,” Gustavo Flores-Macias said.
Here’s a look at how key Kentucky industries, such as automobile manufacturing and bourbon, may be impacted by the tariffs:
How will Kentucky’s bourbon industry be impacted be tariffs?
Kentucky’s bourbon industry was previously targeted during Trump’s first term as president when he implemented tariffs on steel and aluminum, causing the European Union to slam a 25% retaliatory tariff on American whiskey, which includes bourbon.
Under former President Joe Biden, the EU retaliatory tariffs against American whiskey were halted, giving Kentucky bourbon some much needed reprieve. With the expiration of that pause set to expire on March 31 and return at a rate of 50%, Kentucky bourbon now faces uncertainty across three major global export markets: Canada, the European Union and Mexico.
“Unfortunately, … we’re kind of seen as collateral damage to the trade war,” Victor Yarbrough, CEO and co-founder of Brough Brothers, previously told the Courier Journal.
When the initial announcement of tariffs on Canada and Mexico was announced in February, Canada vowed it would flush Kentucky bourbon from the shelves and implemented a 25% tariff against U.S. goods.
These actions were paused for the past 30 days. Now, with the Trump tariffs back, it is likely the U.S. will face further retaliatory tariffs that could impact the spirits industry. Distilled Spirits Council of the United States President Chris Swonger said he is concerned that Canadian stores will once again remove U.S. spirits from its shelves and American whiskey will be stuck in another retaliatory trade war.
“At the end of the day, tariffs on spirits products from our neighbors to the north and south are going to hurt U.S. consumers and lead to job losses across the U.S. hospitality industry just as these businesses continue their long recovery from the pandemic,” Swonger said in a November statement.
In a Monday afternoon statement ahead of the March 4 tariff return, Swonger said DISCUS would like to see tariffs imposed by the U.S. on Canadian and Mexican spirits lifted in an effort to protect U.S. spirits from facing retaliation.
“With spirits products between our three countries already benefitting from fair and reciprocal trade, it makes no sense to have them embroiled in this trade dispute,” Swonger said.
Major bourbon distillers in Kentucky such as Brown-Forman, the maker of Jack Daniels, Woodford Reserve and Old Forester, which, as one of the leading exporters of U.S. spirits globally, has 55% of its net sales coming from outside the U.S., stand to feel a substantial impact from the tariffs.
Other major Kentucky bourbon companies that are big exporters and could be impacted include Heaven Hill, the maker of Evan Williams; Beam Suntory, which produces Jim Beam and Maker’s Mark products; and Diageo, the owner of Bulleit Bourbon.
U.S. Rep. Morgan McGarvey previously said Kentucky “will feel the pain even more acutely” when tariffs, especially retaliatory ones on bourbon, take place.
In 2023, the three largest export markets for U.S. distilled spirits were the European Union, Canada and Mexico, respectively, according to the Distilled Spirits Council of the United States.
“American spirits consumers as well as restaurants and bars across our country that are still struggling following the pandemic closures will shoulder the burden of these tariffs,” Swonger said.
How will Kentucky’s automotive industry be impacted be tariffs?
Kentucky’s automotive manufacturing industry, which includes two Ford Motor Co. plants in Louisville and a Toyota plant in Georgetown, among others, also stands to be impacted by tariffs.
“The automobile sector, in particular, is likely to see considerable negative consequences, not only because of the disruption of the supply chains that crisscross the three countries in the manufacturing process, but also because of the expected increase in the price of vehicles, which can dampen demand,” Flores-Macias, with Cornell University, said.
The auto sector in Kentucky and elsewhere stands to be majorly impacted, with the February tariff on China rising an additional 10%, combined with a 25% tariff on all steel and aluminum imports, as well as tariffs on imported autos and semiconductors. Those costs may leave America manufacturers scrambling — and in some cases delaying domestic production altogether.
“Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen,” Ford CEO Jim Farley said in February. “Frankly, it gives free rein to South Korean, Japanese and European companies that are bringing 1.5 million to 2 million vehicles into the U.S. that wouldn’t be subject to those Mexican and Canadian tariffs. It would be one of the biggest windfalls for those companies ever.”
Some experts say that even if the Trump tariffs do encourage the onshoring of parts along the automotive supply chain, prices that will ultimately be passed down to consumers at purchase are still likely to rise for the simple fact that overall costs and labor rates in the U.S. are higher than in Asian countries or Mexico.
“Tariffs may be good in certain situations but, overall, someone has to pay for increased prices no matter where they are produced, and that will likely be the consumer,” vehicle manufacturing expert Laurie Harbour told the Detroit Free Press.
How will consumers be impacted by the Trump tariffs?
As industries cope with higher production prices and a desire to remain profitable in a global economy, workers will likely directly feel the tariff impact.
Eric Gregory, president of the Kentucky Distillers’ Association, along with Swonger of DISCUS, previously told the Courier Journal a large concern of tariffs hitting the bourbon industry is the potential job loss it stands to create in the commonwealth and among supporting industries.
“Look who’s going to ultimately pay the price: The farmers who grow the corn, the coopers and the loggers who depend on harvesting timber, the truckers who drive the barrels and the truckers who drive the finished product, not only in Kentucky, but all across the country,” Gregory previously said.
“Anything that impacts the Kentucky bourbon industry will impact thousands and thousands of other workers here whose hands don’t make the whiskey.”
Contact business reporter Olivia Evans at oevans@courier-journal.com or on X, formerly known as Twitter, at @oliviamevans_.