As the spirits industry faces mounting challenges, the proposed 25% tariff on Mexican and Canadian tequila is just one aspect of a broader trade issue affecting American distillers. The Kentucky Distillers' Association (KDA) has raised alarms regarding the reinstatement of tariffs on American whiskey, which threatens the growth of Kentucky's distilling industry. Currently, Kentucky has a record 14.3 million barrels of Bourbon aging, and the European Union plans to impose a staggering 50% tariff on American spirits starting in March 2025 [7fe24e95].
The KDA warns that these tariffs could lead to significant job losses and economic harm, having already cost Kentucky Bourbon $500 million in exports since 2018. KDA president Eric Gregory has highlighted the industry's substantial economic contributions while noting the challenges posed by tariffs, taxes, and changing consumer trends [7fe24e95].
In a recent webinar hosted by the Wine and Spirits Wholesalers of America (WSWA) on December 10, 2024, industry experts discussed the potential impacts of the tequila tariffs, which could result in nearly 100,000 American jobs being threatened due to the proposed tariffs [eef8e76a]. A 20% tariff could lead to a US$2.9 billion loss in tax revenue, while the proposed 25% tariff on tequila alone could result in approximately 14,000 job losses and US$744 million in lost wages [eef8e76a].
The barrel tax in Kentucky has increased over 450% since 2009, prompting legislative action to phase it out over 20 years. Newly-elected KDA Board Chair Ken Lewis emphasizes the need for careful navigation of these challenges to ensure sustainable growth in the industry [7fe24e95]. Meanwhile, the WSWA is advising importers to diversify their portfolios to mitigate risks associated with the tariffs, as the overall Consumer Price Index (CPI) rose by 2.7% in November 2024, adding further pressure on the economy and the spirits market [eef8e76a].
The combined effects of these trade policies could reshape the landscape of the spirits industry, affecting everything from production to pricing and employment, particularly for craft distillers who are also contending with potential tariffs on American whiskey exports to Europe [b4a551b3].