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How Trump’s tariffs haunt Kentucky’s whiskey distillers: ‘We’re still on death row’

Dozens of cases of whiskey sit Located on the ground floor of James E. Pepper Distillery in Lexington, Kentucky. Ready to ship — but President Joe Biden Not working to end the trade dispute that started under the former President Donald Trump, None of it goes to thirsty customers abroad.

The owner, Amir Pee, had a big dream of selling James E. Pepper in Europe when he started making these bottles four years ago. He rented space in a warehouse in Europe and built a whole new distribution system. But then Trump launched a series of trade struggles with the European Union. This retaliated by imposing a 25% tariff on American whiskey, making bottles of pea much more expensive for European drinkers.

Peay’s sales in Europe steadily declined, and over time James E. Pepper lost 75% of its overseas operations. After Biden took office, he wanted a reversal, but like any other exporter, he was disappointed.Biden is meeting with his foreign counterpart this weekend G7 summit In the UK, however, it is unclear how long tariffs will continue, despite recent signs that US and European officials will begin trade negotiations.

“We are still on death row,” Pee said.

Long-term game

Whiskey must be aged for a minimum of 2 years to be considered straight bourbon. James E. Pepper Spirits usually take longer.

One of America’s oldest whiskey brands, it began production during the Revolutionary War and is intertwined with American history. The Old Fashioned Cocktail was created in honor of Colonel James E. Pepper, and the spirit liquor manufacturer contributed to the passage of one of the first federal consumer protection laws, the Bottled in Bond Act.

Related: US whiskey distillery faces 50% tariffs in Europe if Biden leaves Trump’s trade policy intact

The brand and distillery were abandoned for decades before Peay began distilling by name again in 2008. He, The original land, reopened in 2017, named the flagship label “1776”.

“When we fill barrels of whiskey here today, we are planning what to do with them in four years. And we have cleared up for Europe, a fruitless stock. “We made plans and forecasts based on,” added Pee, an entrepreneur and history enthusiast who revived after discovering the rich past of the James E. Pepper brand.

Distillation is a long-term process. It starts with crushing the grain, which is fermented on the upper floors of the distillery, Pee explained one day this week, dipping his fingers in a bat to taste.

“It’s been cooked for about 42 hours and will be stationary tomorrow,” he said.

After that, it is stored in an off-site building called Rick House and becomes old. That is, today’s barrels could land on the shelves in 2025. But Pee doesn’t know if there is a demand for James E. Pepper whiskey at European bars.Restaurant By the time it does.

“There is no guarantee that it will regain its momentum. When it loses its place on the shelves, consumers have tried something else,” he said.

Collateral damage in Trump’s trade war

Trump slaps tariffs on foreign-made steel and aluminum, Protect US Producers In 2018, Europe retaliated with whiskey tariffs. Used in other typical American products such as Harley-Davidson motorcycles, peanut butter and denim.

Targeting whiskey had another political benefit. It caused distress to industry in Kentucky, the hometown of Senate Republican leader Mitch McConnell.And Harley-Davidson is based in Wisconsin and was represented in 2018 by former Republican Paul Ryan, who subsequently chaired the House of Representatives.

McConnell is no longer the majority leader, Ryan is no longer in the House of Representatives, and Trump is no longer the president — yet tariffs remain. Doubled to 50% on June 1st..A few days ago, the European Union announced that it would postpone its escalation until December, when authorities began. Discussion With US counterparts on steel and aluminum overproduction.

Biden leaves Trump tariffs intact

It is ultimately up to Biden to eliminate tariffs. However, they are now being accepted by the US steel and aluminum industry, which is key to the president’s mission to rebuild domestic manufacturing and national infrastructure.Biden’s Chief Trade Officer, Office of the United States Trade Representative Katherine Tai, has made any deal. Address global excess capacity.

Tariffs Made steel more expensive For American buyers — this is another hit for Peay, who is building a new warehouse at home.Rising steel prices and recent surges Timber priceHas raised construction costs by more than 33% over its original plan.

Biden also left Trump’s tariffs intact Approximately $ 350 billion made in China.. While U.S. importers cost billions of dollars to import items ranging from baseball caps to bicycles, the new administration is unfair, including intellectual property theft and forced technology transfer. It continues to take a strict stance on China to engage in trade practices.

Related: This is why Biden has left Trump’s Chinese tariffs intact.

Still, there were other signals that Biden was trying to ease trade tensions.Earlier this year, both he and the European Union agreed Stop for 4 months A long-standing controversy over tariffs imposed in connection with another issue, the calming of Boeing and Airbus.

“We are optimistic that the Biden administration is doing everything it can to solve these complex trade problems,” said Chris, President and Chief Executive Officer of the Distilled Liquor Council.・ Swonger says.

Whiskey “Bonanza”

There is no doubt that tariffs are chilling US exports, which have been allowed to enter Europe tax-free for the past 20 years.Now the usa is exporting Almost 30% less Whiskey than before tariffs.

Brown-Forman, the manufacturer of Jack Daniel’s and the largest exporter of American whiskey, bears about 15% of all tariff bills from Europe and the United Kingdom and has been hit hard, CEO Lawson Whiting said. I mentioned it in the announcement of financial results in March.

Still, the industry is doing very well overall.

“Although tariffs have been hit hard, domestic growth and interest in Bourbon are on the other side of the roof and are persistent,” said the author of “Bourbon: American Whiskey Rise, Fall, and Rebirth.” Fred Minick says.

Whiskey sales up 49% Over the last five years, it has grown last year as bars and restaurants were forced to close due to a pandemic.

Distilled liquor manufacturers face higher taxes abroad, while domestic distilled liquor manufacturers are tax-reduced. At the end of last year, Congress made the first tax cuts temporarily implemented by the 2017 Tax Reform Act permanent. This will reduce federal sales tax from $ 13.50, the first 100,000 gallons, to 2.70 gallons. This makes a big difference, especially in small craft distilleries.

“Last year was a huge success,” said Connor Lennon, a university economist. Louisville — But he added: “It’s not an argument in favor of tariffs. They want to sell here and there.”

Lost opportunity

Named after a limestone stream through Lexington, the main ingredient in Kentucky whiskey, the Town Branch Distillery could easily increase exports abroad without tariffs.

Its parent company, Alltech, owns a distillery in Dublin, and Lexington’s location can leverage its distribution network to expand its international business.

However, tariffs were imposed before the increase in exports became a major part of the town branch plan.

“We hurt us because we couldn’t expand in our sister business,” said Alan Kennedy, a distiller and blender.

So far, Town Branch is also growing at home, making it the only Lexington stop in Kentucky. The Bourbon Trail-and the only trail with a brewery on site-Rob Class, director of spirits, is optimistic that next year will be as strong as the country will open.

“We didn’t lose to Europe. We lost our chances in Europe,” said the class. “But we are ready to go whenever the time comes.”

How Trump’s tariffs haunt Kentucky’s whiskey distillers: ‘We’re still on death row’ Source link How Trump’s tariffs haunt Kentucky’s whiskey distillers: ‘We’re still on death row’

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