Kentucky in Trump's tariff crosshairs

Politico

17-03-2025

Driving the day
— President Donald Trump's decision to wage a trade war with Europe is threatening Kentucky's bourbon producers.
— U.S. trading partners have two case studies to consider as they weigh how to deal with Trump's persistent tariff threats.
— Companies including Elon Musk's Tesla are urging the Office of the U.S. Trade Representative against broad-based tariffs.
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Driving the day
SOBERING THREAT: In deep-red Kentucky, Trump is facing a growing backlash over his tariff policies from business leaders and lawmakers who are anxious the state will bear the brunt of a trade war with the European Union.
The global spirits industry is bracing for pain: The EU is enacting 50 percent tariffs on U.S. whiskey starting April 1, in retaliation to Trump's latest round of duties on steel and aluminum.
In response, the president upped the ante further, threatening a whopping 200 percent tariff on alcohol from France and other EU countries. The announcement came weeks before Trump's reciprocal tariffs planned for April 2, which could mark another blow to industry.
Victor Yarbrough, who helped open Brough Brothers Distillery, the first Black-owned bourbon distillery in Kentucky, told Morning Trade that the administration's tariff policy is rattling the industry. Kentucky is at risk of becoming 'collateral damage' if the escalation continues, he said.
'2025 was going to be the year of expansion for us,' Yarbrough told your host, outlining plans to expand into Canada and European countries like France and Germany. But the ongoing trade threats, 'Effectively put a hiatus on all of this — and impacted our ability to kick our export strategy into gear.'
Kentucky, which produces the vast majority of the world's bourbon, would be particularly at risk of any trade war escalations. The European Commission last week said it would reimpose tariffs on iconic American products such as Harley-Davidson motorcycles, jeans and bourbon.
Lawmakers makes their case: Republicans in Kentucky are also voicing their grievances, even forming a rare alliance with the Democratic governor.
'Tariffs are taxes and if you tax trade you'll get less trade and less prosperity,' GOP Sen. Rand Paul wrote in a post earlier this month on X.
The criticism comes alongside that of former Senate GOP leader Mitch McConnell — and Democratic Gov. Andy Beshear, who warned the tariffs would harm 'all of our American families' in an interview on Saturday.
'I don't say that because I'm a Democratic governor and he's a Republican president. I say that because it's his decision and his decision alone that's harming our American families,' Beshear told CNN.
Not just the EU: Industry groups also tell Morning Trade that several Canadian provinces have removed American alcoholic beverages from store shelves as a form of retaliation, after the U.S. launched 25 percent tariffs on the country — before temporarily scaling some back.
'The growth of our industry is very, very intertwined,' Chris Swonger, president & CEO of the Distilled Spirits Council of the United States, told Morning Trade. He added, 'We have American companies that may own Canadian whiskey or a tequila, or an Irish Whiskey or a Cognac. So those American companies could be getting hit from all sides.'
Around the World
TO DEFY OR KISS THE RING? Countries have been taking notes on two opposing strategies for responding to Trump's persistent tariff threats, the international trade team reports.
Canada has taken a more confrontational approach, including immediate retaliation, and drew swift White House retribution; Mexico has tried to lay low and buy time, but doesn't have much more to show for it.
World watches: Most countries hit by Trump's aluminum and steel tariffs took Mexico's more cautious approach.
The U.K. 'will keep all options on the table,' new Prime Minister Keir Starmer said, but did not respond to the steel and aluminum tariffs. Instead, Starmer is sending his trade chief, Jonathan Reynolds, to Washington this week, and is expected to start hammering out a trade deal.
Meanwhile, Australian Ambassador to the U.S. Kevin Rudd said his country has been watching the recent U.S. back-and-forth with Canada and Mexico as well as China, and told Australian media that he saw room for negotiation.
How long can they thread the line? Any carrot-based strategy can only stay that way so long, as U.S. trading partners stare down Trump's April 2 target for reciprocal tariffs.
CALM FROM CANADA? Ontario Premier Doug Ford and Commerce Secretary Howard Lutnick will get another chance to hammer out their differences when they meet again this week.
Ford told reporters that he is hopeful that the 'temperature is being lowered' after a meeting with Lutnick on Thursday, while confirming their next confab.
REGULATORY REVIEW
INDUSTRY ANXIETY: Hundreds of companies, including Elon Musk's Tesla, are weighing in on the Office of the U.S. Trade Representative's review of unfair trade practices from foreign countries and warning that unchecked tariff hikes would weigh on global industry.
Tesla, in a letter dated last week, said the company would be 'exposed' to retaliation and asked the trade office to 'consider the downstream impacts' of trade actions. The letter also warned that past tariffs have 'increased costs to Tesla for vehicles manufactured in the United States' and resulted in a 'less competitive international marketplace for U.S. manufacturers.'
That sentiment is reflected by a wide range of industry groups in a signal of broad anxiety over Trump's tariff threats.
That includes the U.S. Chamber of Commerce, which also slammed broad-based tariffs as a tool for policy and called on the Trump administration to pursue a 'zero-for-zero' approach to other countries' trade curbs. 'The best pro-growth response to foreign trade barriers is to negotiate enforceable trade agreements to eliminate tariffs and other trade barriers, open foreign markets, and guarantee reciprocity,' they said in their own submitted remarks.
AMERICAN AI EXPANSION? More than a dozen trade and tech groups sent a letter asking Trump to focus on opening up foreign markets to American AI and AI-enabled products.
The push comes on the heels of Trump's Jan. 23 executive order, designed to remove barriers to U.S. leadership of the technology, which tasked his advisers to develop an AI action plan within 180 days.
'To protect America's AI edge, it is critical that your administration's AI Action Plan include a robust international engagement strategy that ensures foreign markets are open to American AI,' the groups wrote in a letter sent to the president and obtained by Morning Trade, signed by the National Foreign Trade Council and the U.S. Council for International Business, among others.
TRADE OVERNIGHT
— French PM says EU hitting wrong targets with retaliation tariffs on US, per POLITICO Pro.
— Puck around, find out: Florida and Canada are on a trade war collision course, POLITICO reports.
— Europe's drug shortage plan looked like a win for the EU and US — until Trump got involved, POLITICO Pro reports.
— Key consumer sentiment gauge plunges amid concern over Trump trade wars, per POLITICO.
— Top broadband official exits Commerce Department with sharp Musk warning, POLITICO reports.
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