Bourbon distillers face big tax bills and higher tariffs after a record year for production
Since the entirety of bourbon production can only occur within the U.S., per a 1964 congressional resolution that called it a “distinctive product of the United States,” a tariff on the drink comes across as a strategic political punch to Kentucky, which is represented by Sen. Mitch McConnell, the top Republican in the Senate.
Kentucky’s unique climate and pure limestone water is why the Bluegrass State is considered the birthplace of bourbon, responsible for 95% of the world’s supply of bourbon. Kentucky’s bourbon business employs approximately 20,100 workers and generates a smooth $8.6 billion annually.
“No other country in the world can produce a whiskey and call it bourbon. So when you’re looking at something to target that is uniquely American and can’t move its production overseas, bourbon is a good target,” Gregory explained. “There are no winners in trade wars, only consequences and we’re a consequence.”
In 2018, China, Mexico, Canada the European Union and the United Kingdom imposed retaliatory tariffs on American whiskey in response to U.S. Section 232 tariffs on steel and aluminum.
Since the imposition of 25% tariffs on American whiskey, exports to the EU, the largest export market for the spirit, plunged 37% from $702 million in 2018 to $440 million in 2020, according to figures provided by the Distilled Spirits Council.
Bourbon exports to the UK, the fourth-largest market for American whiskey, declined by 53% from $150 million in 2018 to $71 million in 2020.
In 2019, a long-running trade battle between U.S. aerospace titan Boeing and European rival Airbus took an anxious turn when the Trump administration imposed a 25% retaliatory tariff on single malt Scotch whisky and single malt Irish whiskey from Northern Ireland, and certain liqueurs and cordials from Europe.
Tit-for-tat retaliatory tariffs across the Atlantic ensued, further exacerbating problems for the bourbon industry.
Article source: https://www.cnbc.com/2021/10/06/bourbon-distillers-face-tax-bills-higher-tariffs-after-record-year-for-production.html