What the Threatened Whiskey Tariff Would Mean for American Drinkers

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A recent New York Times op-ed by expert bourbon writer Fred Minnick sent more than a ripple of concern through the community that follows the business of American-made whiskey.

We’re talking about bourbon and Tennessee-style whiskey.

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Whiskey Facebook groups and back rooms of high-end bourbon bars like Jack Rose Dining Saloon in Washington, D.C. were buzzing, anxious about Minnick’s thesis. It went like this: “If President Trump follows through on his threat to impose tariffs on steel imports, expect to see an immediate response from the European Union – including retaliatory tariffs on, of all things, bourbon.” The incendiary proposal prompted enough questions to get drinkers talking, and the conversation has been top-of-mind ever since. 

The article was titled: “Will Trump Kill the Bourbon Boom?” And, so, will it? 

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Some say there’s more than enough whiskey and whiskey fans to support both the old and new distilleries. Others say the effect could be dramatic. Take liquor analyst Harry Kohlmann, who founded and runs the consulting firm Park Street in Miami. He says that for years there has not been enough bourbon to go around, and if suddenly prices go up in Europe and Asia, people will still want, and be willing to pay for, high-end brown liquor.

“If you think about luxury goods like Hermes or Chanel, the duties would have to be so unbelievably high. It’s not going to make a big difference. If there is going to be an impact, it will be on the lower end.”

That means if a bottle of George T. Stagg from the Buffalo Trace Antique Collection, which might sell for 800 euros, suddenly goes up in price by 50 percent, anyone who is already in the market for something that pricey will likely stay in the market.

But, Kohlmann says, if a French drinker who is used to buying Maker’s Mark or another mid-range bourbon for about 30 euros sees the price go up to 45 euros, he might hesitate or switch drinks altogether.

“It’s not like the middleman will make less, so it’s the consumer who has to pay more,” he says.

But which consumer will pay more? The ones here in the U.S. or the ones in Europe? 

Bill Thomas runs the aforementioned Jack Rose. He is worried about bourbon’s future if it becomes a pawn in trade wars. He thinks the tried and true brands that have been supplying Americans with brown water since the end of prohibition will be fine, but that they might increase prices to counteract softer sales abroad. He’s more concerned, however, about small distillers like Smooth Ambler in West Virginia or High West in Utah. Those fairly young distilleries may have factored foreign markets into their current production and business plans.

“You have more at stake now. You have a market that could be dramatically impacted,” he says.

Thomas says that’s because bourbon production in the U.S. has only just recently reached the levels of the 1970s. After a major downturn in the 1980s and 1990s, there’s finally a similar amount of whiskey being produced in the U.S. as there was when your parents were young. Many of the producers who have jumped into the business because of the boom may look good today, but they are still fragile.

Interestingly, producers like Catoctin Creek, a small, award-winning rye and brandy producer based in Virginia, just about an hour outside of Trump’s White House, don’t seem overly worried.

“It wouldn’t be the ending of our business [if we couldn’t sell our whiskey abroad], because there’s been a lot of nice demand here in the U.S.,” says Scott Harris, who founded the distillery with his wife Becky in 2009. “But we’ve been growing our international business, and [tariffs] would put that to a screeching halt.”

Harris explained that an American-made whiskey must travel a road littered with importers, distributors, marketers and retailers all getting their cut of 10-30 percent before it gets in the hands of a consumer in Italy.

“You can see the prices going up, up, up. A bottle of our whiskey that sells over here for $45 can be upwards of 60-80 euros, and if you stick a tariff on there, you’re just putting it even further out of reach.”

Justin Lew, the director of marketing for High West, said his company exports just a tiny fraction of what it produces. So there’s at least one distiller that’s not that worried about the prospect of a trade fight.

Smooth Ambler, on the other hand, just signed a major partnership deal with Pernod Ricard on the hopes of increasing its footprint both at home and abroad. Outside of the U.S., the brand is only available in the United Kingdom.

John Little is the co-founder and CEO of Smooth Ambler. He’s not happy to see craft spirits and its $2.4 billion in annual sales becoming a political issue.

“I shouldn’t have to talk about how a political mess could damage our business in European markets,” he said in an e-mail. You can imagine the steam coming out of his ears as he typed it.

The next question on everyone’s mind is: “if more good American whiskey stays home, will I be able to go out and buy Pappy Van Winkle?”

The answer, generally, is no.

We asked Buffalo Trace, which distills the Van Winkle bourbons for the esteemed family, how much of their good stuff goes abroad and whether more would stay home if Minnick’s thesis proves correct. They chose not to comment for this story. However, Ryan Wegman, the VP of Assets and Development at Sherry’s, was happy to give his opinion.

“If you’re wondering whether increased availability back home is going to drive the price down for whiskies at that level, those people are always going to be hungry for those whiskies and they’re already at stratospheric (price) levels.”

The demand for these once-in-a-lifetime, highly allocated whiskies is so high that if cities like Los Angeles or New York suddenly find themselves with a dozen more bottles, they’ll be gone in a flash or stashed on a high shelf for 10 times MSRP — as they already are today.

“Those are so under-supplied, it’s ridiculous,” says Thomas. “If you offered me tomorrow an unlimited amount of those bottles, we’ll take every bottle we could get. If you flooded me with a thousand of them, we’d figure out a way to finance it.”

Thomas is obviously a huge whiskey fan. That’s why he owns the bar. But he also believes American whiskies are still a great value even if prices have been slowly creeping upward. He thinks American distillers know their stuff is so good, they can afford to jack up prices at home if sales fall abroad.

That’s why the U.S. consumer is poised to see the effect of a tariff abroad in his wallet at home.

“If they really wanted to, there’s no doubt in my mind these whiskies could take a 25 percent increase in cost and still be a ‘value’ whiskey,” Thomas says. “That’s what I’m concerned about. If you’re looking at a loss of revenue, you have to look at the market you’re in and say “could we afford a price increase?’ And they could easily afford to do it.”

If, suddenly, Buffalo Trace (makers of brands like Buffalo Trace, Blanton’s, Eagle Rare and more) or Heaven Hill (Elijah Craig, Evan Williams, Henry McKenna and Parker’s Heritage Collection) can’t sell their bourbon abroad, they could make up for it by improving distribution throughout the 50 states. For example, Thomas says a number of brands are not available outside of Kentucky. Make those available on every shelf in the U.S. and you could have a solution.

“I’d rather deal with a supply problem than a price increase of 25 percent,” Thomas says.

Beyond price increases and supply problems, some of those interviewed for this story are worried about the Trump administration hurting the U.S. reputation abroad. If their “America first” platform kills the “cool factor” of U.S.-made whiskey, that would be worse than any tariff.

Kohlmann says it best, his slight German accent lending credibility to his European market opinion.

“The world looks at the United States with a critical eye. When you used to travel from the U.S. and you say you are from the U.S., everyone was impressed. Now, could there be a backlash against American products because the branding of the U.S. is being hurt? I don’t want to see it happen, but if it does, it’s not only the bourbon producers that are going to have to worry about it. It’s people like Apple, McDonald’s. They’re going to have to worry about it, too.”

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