Whiskey Tariffs Made Prices Fall Nationwide, Except In Two States

The 2018 Tariff War Changed What Americans Paid for Whiskey, Depending on Zip Code

Jack Daniel’s. Jim Beam. Evan Williams. These names line liquor store shelves from Maine to California, woven into American culture and commerce. When foreign governments slapped heavy taxes on American whiskey exports in 2018, the people making those bottles faced a financial gut punch, and what happened next reveals something surprising about how American businesses fight back.

A new study published in The Accounting Review finds that when China, Mexico, the European Union, and Canada imposed steep tariffs on U.S. whiskey during the 2018 trade war, American producers didn’t absorb the losses quietly. Instead, they ran a calculated, geography-based pricing strategy at home, one that led to lower prices for many consumers and higher prices for others, with where consumers lived playing a major role.

Between 2018 and 2020, U.S. whiskey exports fell from $1.19 billion to $846 million. With overseas demand falling and years of production already in the pipeline, producers couldn’t quickly scale back supply. That surplus had to move somewhere: America’s own backyard.

Kentucky Bourbon Became a Political Target in the 2018 Trade War

In March 2018, the Trump administration imposed tariffs on steel and aluminum imports, setting off a chain reaction among trading partners. By mid-2018, the EU, Canada, Mexico, and China had all struck back with tariffs specifically targeting American whiskey and bourbon, formally recognized as distinctive American products. Whiskey was chosen, at least in part, as a political jab at Kentucky, home state of then-Senate Majority Leader Mitch McConnell. Kentucky and Tennessee together produce over 86 percent of whiskey sold in the United States, and Kentucky alone produces 95 percent of the world’s bourbon. Industry organizations described distillers as “collateral damage” in trade disputes unrelated to the spirits sector.

Brown-Forman, the maker of Jack Daniel’s Tennessee Whiskey, estimated the tariffs would impact its finances by $125 million as U.S. whiskey exports to the EU declined by nearly 30 percent almost immediately. Smaller distillers reported losing half their export business.

Whiskey Prices Fell 22 Cents on Average After Tariffs Hit

Researchers Carlyle S. Burd of North Carolina State University and Duke Ferguson of the University of Kentucky used a detailed NielsenIQ dataset covering weekly retail prices and sales from 97 retailers, 8,674 stores, 989 brands, and more than 2,500 unique products nationwide. Their analysis covered 2018, comparing conditions before and after July 1, when the wave of foreign tariffs had fully taken effect.

To isolate what the tariffs caused, researchers compared U.S.-produced whiskey to imported whiskey as a control group, since imports weren’t subject to the same tariffs and could show what domestic prices might have looked like without the trade war. Government-controlled alcohol markets were excluded, since their heavily regulated pricing rules would muddy the comparison.

On average nationwide, U.S. whiskey prices fell by about 22 cents per bottle compared to imported whiskey after the tariffs hit. That may sound small, but it translated into a 2.8 percent increase in per-store weekly sales, as producers used lower prices to move more whiskey through the domestic market.

Whiskey Prices Rose in Kentucky and Tennessee While Falling Everywhere Else

That national average hid enormous geographic variation in what producers were actually doing.

In Kentucky and Tennessee, where whiskey is a cultural institution and major employer, prices for locally made products sold in those same states actually rose after the tariffs, up roughly 17 to 22 cents more than the same products sold elsewhere. Sales volumes there increased too, meaning consumers kept buying even as prices ticked upward.

Kentucky alone saw more than 600 news articles about the tariffs in 2018, with Tennessee generating over 200. The researchers argue heavy coverage may have reinforced local loyalty for an industry residents saw as tied to their communities.

In states where whiskey isn’t particularly popular, producers cut prices by an average of 44 cents, substantially more than the price change seen in high-consumption states like Kentucky and Tennessee. Convincing someone to grab a bottle of American whiskey in a low-demand market required a real discount.

Producers also cut advertising spending nationwide, a pattern the researchers say is consistent with trimming discretionary expenses when performance weakens. Kentucky and Tennessee were the exception, where spending held steady.

Higher-end whiskey, priced above $30 per bottle, saw the deepest cuts nationally, about 38 cents on average, while cheaper bottles barely moved. Price cuts at liquor stores specifically ran even deeper, suggesting producers had more flexibility negotiating with specialty retailers.

Whiskey’s Long Aging Process Made Pricing the Only Quick Fix Available

Researchers point out that whiskey’s multi-year aging process makes it unique. Producers must plan years ahead and can’t simply pause production when demand drops, which is why pricing became the lever they could pull quickly. Even so, this dynamic isn’t exclusive to whiskey. Any industry with long production cycles and limited flexibility, including parts of manufacturing and agriculture, faces the same pressure during a sudden trade shock.

With trade tensions between the United States and its partners remaining a live issue, the lesson from the whiskey wars of 2018 carries real weight. When foreign tariffs shut off overseas markets, American producers don’t suffer passively. They adapt, strategize, and redirect the burden in ways that hit some consumers harder than others, depending on where those consumers happen to live.

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