Kentucky Bourbon Industry Welcomes Pause in EU Tariff Rise | Voice of America

LEXINGTON, KY. – James E. Pepper bourbon is as old as America itself.

“Originally founded during the American Revolution,” says current owner Amir Peay, who adds that since its inception in 1780, this distinct brand of Kentucky-made bourbon has passed the lips of many prominent Americans. “Favorite brand of Ulysses S. Grant, Andrew Jackson, Henry Clay and many more.”

The distillery closed in the 1960s after the Pepper family left the company and sales stabilized. But Peay saw an opportunity to relaunch the historic brand in 2008. Today, the spirit is more popular than ever, both at home and abroad.

After spending millions of dollars to mature some initial casks and renovate the distillery, which reopened in 2017, Peay set a goal of increasing the brand’s international market share.

“While it only represented about 10% of our business in 2017, we saw plenty of opportunities for expansion,” Peay told VOA. “In fact, we thought we could grow it to about 20% of our business in 2018 and 2019.”

He did this by investing even more, creating a 700 milliliter bottling line destined for Europe, which Kentucky Distillers’ Association president Eric Gregory said was a lucrative export market to the United States. time.

“Our exports increased 98% between 2010 and 2017,” Gregory explained in a recent interview. “Most of that went to the EU, which was our biggest export market. We were seeing an average of 20% to 30% growth each year to the EU.”

Peay says no trade barriers were on his radar at the time and he had no reason to believe that would change. “At the end of 2017, there were no tariffs on American whiskey in Europe and most markets around the world.”

But his dreams of continued expansion would be dashed by a trade war that erupted under the former Trump administration.

“The United States has imposed tariffs on steel and aluminum products from a number of countries, including (some of) the European Union, and the European Union has decided to respond with tariffs on a number of products, “he said.

US products targeted included bourbon, which since 2018 has been subject to a 25% tariff in Europe.

“Crippling,” said Gregory. “It’s something we never saw coming.”

Pricing issues

About 95% of the bourbon is made in Kentucky. The state’s $ 8 billion industry employs more than 20,000 people.

Global sales fell 35% after tariffs were imposed, sending shock waves through the industry. And it was going to get worse. EU tariffs were set to double from 25% to 50% on June 1, but the increase is on hold as the Biden administration negotiates a broader trade deal.

“The problem we are facing right now is that all whiskey imports entering the United States are duty free for the next four months. Meanwhile, we are facing another 25% of our exports,” said Gregory, who hopes the negotiations will lead to a return to zero tariffs. “For us, it’s about getting back to free and fair trade. We just want people to sit down at a table and fix this problem.”

Until then, Peay is trying to deal with the uncertainty the trade war continues to create for his business, which relies on long-term planning.

“Even during the difficult year with the pandemic, we had a very good performance at the national level. Internationally, we were decimated because of the trade war,” he told VOA. “The longer it lasts, the more damage it will do.”

Distilling whiskey, Peay explained, is a long and expensive process. Market certainty is essential.

“You don’t want to send any product – and that’s especially true for a small business like mine – that’s in a warehouse and doesn’t sell, because that’s a lot of money we’ve put into production. of this whiskey, and there’s no guarantee it will sell, “he said.” How are we going to get it back here in the States? We can’t sell it here (once returned), so it’s very risky to do so. “

The end of the dispute with the EU over steel tariffs that led to the bourbon tariffs is unclear. Steel groups in the United States support tariffs, which have helped revive a long-languished industry.

Trade cooperation will be on the agenda during President Joe Biden’s first overseas trip, a US-EU summit scheduled for June in Brussels.

About Harold Fergus

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