Tennessee whiskey, auto are among industries most vulnerable to Trump tariffs
Tennessee whiskey, auto are among industries most vulnerable to Trump tariffs
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Tennessee could see a $4 million loss in whiskey exports annually if a 25% tariff is imposed on Canada.
The state's automotive industry could lose $2.85 billion if 25% tariffs are imposed on Mexico and Canada.
The Trump administration has suspended the tariffs for 30 days and is negotiating with Mexico and Canada.
Tennessee's whiskey and automotive industries hold the biggest stake statewide in President Donald Trump's looming trade war. Last week, Trump threatened to impose steep 25% tariffs on Mexico and Canada, and the two countries responded with their own tariffs, many of which targeted red states like Tennessee.
On Monday, the Trump administration negotiated a 30-day suspension of the tariffs with Mexico and Canada — meaning that they won't be enforced for at least a month, if at all.
Prime Minister Justin Trudeau said his tariffs on $107 billion-worth of U.S. goods would not be immediately implemented, and Canada agreed to spend $1.3 billion for "reinforcing the border." Meanwhile, Mexico President Claudia Sheinbaum said she would send 10,000 National Guard troops to the border in exchange for the month-long suspension.
Still, some American businesses are preparing for the worst-case scenario. In Tennessee, many businesses are awaiting direction with trepidation.
"They're just going to have to wait and see what Canada does," said Steven Livingston, director of Middle Tennessee State University's Business and Economic Research Center. "Every time there's been a trade war, bourbon has been hit. It's such an American product."
Predicted $4 million hit to Tennessee whiskey exports
Tennessee exports about $16 million in whiskey to Canada each year, which is a relatively small portion of the state's total $871 million whiskey exports, according to MTSU's Business and Economic Research Center data. The state exports an even smaller amount of whiskey to Mexico.
Livingston estimates that Tennessee would see about a $4 million fall in whiskey exports annually if Trump's trade war ensues and Canada retaliates with a 25% tariff.
"But there's a sort of double-barrel thing here," Livingston said. "If you get the impact of the tariff plus a boycott, how big that would be is kind of hard to estimate. That's new territory."
Following Trump's initial announcement of the 25% tariffs on Feb. 1, several Canadian provinces responded by threatening to pull American liquor products off the shelves. But the boycott was halted along with other retaliatory measures when Trump and Trudeau came to the 30-day suspension agreement.
The last time there was a massive consumer boycott on American whiskey was in 2003 Europe, protesting the Iraq War.
"However, there were not tariffs too. There was just the consumer boycott, which was not that bad of an issue," Livingston said. "But we've never seen the two combined."
Should the tariffs be implemented next month and the boycott resume, Livingston said the joint impact of a 25% tariff and a total American liquor boycott from Canada could result in far greater damages than $4 million.
The Distilled Spirits Council of the United States President and CEO Chris Swonger said Canada's retaliation against American liquor was "extremely disappointing and counterproductive."
"Taking American spirits off the store shelves will needlessly reduce revenues for the provinces and hurt Canadian consumers and hospitality businesses," he said in a statement. "Some spirits are recognized as 'distinctive products' by the U.S. and Canada and can only be made in their designated countries such as Bourbon and Tennessee Whiskey in the U.S., and Canadian Whisky in Canada. As a result, the production of these products cannot simply be moved to another country or region.'
Jack Daniels, other liquor companies see impacts
While the possibility that Trump's tariffs and retaliatory efforts will materialize remains up in the air, liquor companies in America, Mexico and Canada are all bracing for potential impact.
Brown-Forman, the Kentucky-based spirits company that produces Jack Daniel's Tennessee Whiskey, could face tariffs on its tequilas in Mexico and retaliatory tariffs on its American whiskey from Canada and Mexico. Canada and Mexico make up 1% and 7%, respectively, of its 2024 total sales, according to Brown-Forman's 2024 annual report.
The company released a statement Wednesday emphasizing its appreciation for the government decision to halt the implementation of new tariffs:
"Brown-Forman believes our spirits production and sales growth abroad will strengthen our investments and operations at home," the statement said. "We remain actively engaged with government stakeholders, discussing the impact of potential tariffs and advocating for solutions that foster stability for this uniquely interconnected industry. Drawing on past experience with trade-related challenges, we will continue to prepare for various scenarios and implement risk mitigation strategies across our global brand portfolio. We are committed to navigating these evolving circumstances to best serve our consumers and stakeholders."
Other brands that could see consequences include: Budweiser and Stella Artois owner Anheuser-Busch, Corona and Modelo owner Constellation Brands, Miller Lite owner Molson Coors and Jose Cuervo owner Becle.
Billions in Tennessee auto exports, imports could be affected
Tennessee exported about $2.9 billion in cars, trucks and auto parts to Mexico and Canada in 2024, and it imported about $7.8 billion, data from Middle Tennessee State University's Business and Economic Research Center shows.
"The imbalance seems amazing, but remember that the vast majority of cars are being sold in the U.S., so the state is importing product to be put into the final goods that will sbe sold in the U.S. market," Livingston said. "Virtually each of those 'final good' cars has Mexican or Canadian parts in it."
Livingston estimated that the loss of production in Tennessee would be greater than $2.85 billion should 25% tariffs be imposed on Canada and Mexico.
That could result in rising prices of Tennessee-made vehicles from Nissan, Volkswagen and General Motors.
Tennessee leaders remain optimistic about economic future
Leaders at the Tennessee Department of Economic and Community Development are maintaining a positive outlook on the state's economy.
'I'm sure you've seen that President Trump has paused the tariffs, as his administration continues important conversations with America's trade partners," a TNECD spokesperson said in a statement to The Tennessean. "TNECD will continue monitoring the federal government's actions to further strengthen our economy, and we remain committed to supporting the companies in our state and creating greater opportunity for Tennesseans.'
Hadley Hitson covers business news for The Tennessean. She can be reached at hhitson@gannett.com. To support her work, subscribe to The Tennessean.
Mackensy Lunsford is the senior dining reporter at The Tennessean. Reach her at mlunsford@tennessean.com.
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