Mixed Forecast For Kentucky Bourbon Industry In 2025

President-Elect Trump’s intention to start a second trade war points to the return of retaliatory tariffs on American Whiskey, which is threatening the unprecedented growth of Kentucky’s bourbon distilling industry, now aging a record 14.3 million barrels of Bourbon, the Kentucky Distillers’ Association announced today. Industry leaders are sounding the alarm globally that the threat of returning retaliatory tariffs on spirits – which have swept Kentucky Bourbon into trade disputes unrelated to whiskey – will disrupt growth, cost American jobs, jeopardize investment, and hurt local economies across the Bluegrass state. The European Union is set to reinstate tariffs on exports of American spirits at a crippling 50% rate in March if nothing is done. Retaliatory  tariffs from the E.U. and other countries have cost Kentucky Bourbon a half-billion dollars in exports since 2018.

“Bourbon continues to drive Kentucky’s economy as our homegrown industry is generating more jobs, more payroll, more tax revenue, more tourists and more distilleries in more counties than ever before,” said Eric Gregory, President of the Kentucky Distillers’ Association (KDA). “But we are up against a triple threat of back-breaking tariffs, snowballing taxes and shifts in consumer trends that have slowed sales. If tariffs targeting American Whiskey are levied, distillery workers, farmers, truckers, coopers, hospitality staff and entire industries that depend on Bourbon will suffer.”

Gregory said the KDA understands that trade is a complicated issue and tariffs are an effective tool in some circumstances. “However, as proud American manufacturers, we are concerned about the potential retaliation that could impact our products,” he said.

The new numbers released are based on inventories reported as of Jan. 1, 2024. Submitted to the Kentucky Department of Revenue for tax purposes, the numbers represent all distilling companies in Kentucky, the vast majority of which are KDA member distilleries.

As the barrel inventory has skyrocketed, so have the taxes on those aging barrels – more than doubling in the last five years alone. Since 2009, taxes on aging spirits have soared more than 450% and continue to soar in tandem with production. To counteract the mounting tax issue that puts Kentucky distillers at a competitive disadvantage to their peers in other states and countries, legislators passed a law last year that will phase out the barrel tax over 20 years, while protecting funds for schools, fire departments and EMS districts, and giving local governments time to plan and diversify their tax bases.

“With an eye on building a strong Kentucky for generations to come, we are grateful that the pro-growth Kentucky General Assembly passed House Bill 5 to put our signature Bourbon industry on a level playing field with all other states and countries that do not levy such a discriminatory fee,” said Ashli Watts, President of the Kentucky Chamber of Commerce.

Newly-elected KDA Board Chair Ken Lewis said the industry will have to carefully navigate tariffs, taxes and other challenges in the coming years to ensure growth is sustainable for all distilleries, both large and small.

“We’re eager to continue telling the story of Kentucky Bourbon and find solutions with governments around the world that will protect jobs, investments and livelihoods back here at home,” said Lewis, founder of New Riff Distilling and a recent inductee into the Kentucky Bourbon Hall of Fame.

“Global trade has helped spirits of all kinds reach new markets, and while international Bourbon curiosity has grown tremendously, it’s not the only spirit people are turning to,” he said. “As governments work through disputes, the Bourbon industry wants to do all it can to keep spirits out of the line of fire.”

Gregory said inflation and changing consumer trends also have implications for the future. “It’s no secret that our industry is experiencing a slowdown in sales and still working to recover from the pandemic and the last round of tariffs. We are clawing back, but all these challenges are real and come with success.

“Kentucky Bourbon has gone global, more barrels are aging than ever before, and distillers have big plans for the future,” Gregory said. “The one thing we know is that at every turn in history, good things follow when Kentucky distillers are unburdened and allowed to focus on making great whiskey.”