LEXINGTON, Ky. — It’s often said there are more barrels of bourbon in Kentucky than people. Kentucky’s signature industry could be in trouble, however, pending a resolution by President Donald Trump on exports of steel.

 

At the G-20 summit in Hamburg, Germany, Trump threatened to impose up to a 20 percent tariff on steel, with tariffs on other imports such as semiconductors, paper and aluminum possibly coming down the pipe at a future date. As a result, European Union leaders say they will retaliate in the form of their own tariffs on agricultural products such as bourbon, orange juice and dairy.

“Global markets are increasingly important to our signature industry,” said Eric Gregory, president of the Kentucky Distillers’ Assoc. “We have worked hard over the past decade to open doors, level the playing field and eliminate discriminatory tariffs and policies that would put Kentucky bourbon at a competitive disadvantage. We will continue those efforts to promote, protect and elevate its success around the world.”

The reasoning the Trump administration gave for invoking the tariffs is Section 232 of the Trade Expansion Act of 1962. This act dates back to the Cold War and allows the United States to impose protectionist measures if they are deemed critical to national security.

The administration presented the case that the military needs steel for the production of vehicles and buildings and that a tariff would induce the production of more American-made steel, relying less on foreign product, in the case of war.

Bourbon, which accounts for a cumulative $8.5 billion in an industry that employs nearly 17,500 Kentuckians, makes up almost 20 percent of spirit exports from the United States. Nearly 95 percent of all bourbon is made in the Bluegrass State, in which Trump received almost 63 percent of state votes in the 2016 election.

If Trump does decide to go forward with tariffs, G-20 Commission President Jean-Claude Juncker said that the EU would “react with counter-measures” within days. This threat prompted 18 agricultural organizations to send a letter to U.S. Secretary of Commerce Wilbur Ross, voicing their displeasure with the proposed tariffs.

“If the Section 232 investigations on steel and aluminum result in new trade barriers, the aftermath could be disastrous for the global trading system and for U.S. agriculture in particular. U.S. agriculture is highly dependent on exports, which means it is particularly vulnerable to retaliation,” they wrote.

“Many countries that export steel to the United States are also large importers of U.S. agriculture products. The potential for retaliation from these trading partners is very real. Short of explicit retaliation, these countries may also stall efforts to resolve current trade issues if they believe they have been unfairly targeted over legitimately traded products.”

Organizations which penned the letter to Ross were the American Farm Bureau Federation, American Soybeans Assoc., National Assoc. of Wheat Growers, National Barley Growers Assoc., National Cattlemen’s Beef Assoc., National Corn Growers Assoc., National Council of Farmer Cooperatives, National Milk Producers Federation, National Pork Producers Council, National Sunflower Assoc., National Turkey Federation, U.S. Apple Assoc., U.S. Canola Assoc., U.S. Dry Bean Council, U.S. Wheat Associates, U.S Grains Council, USA Dry Pea and Lentil Council and USA Rice Federation.

“It is also likely that the United States would not be the last country to cite national security concerns as a reason to restrict imports,” the letter continued. “In particular, many countries view food security as a legitimate national security concern. If a country as consequential as the  United States can cite national security reasons to preventimports of a sensitive product, others will do the same.”

The proposed retaliatory tariffs could not come at a worse time for Florida as well, where the USDA orange forecast predicted the 2016-17 season would yield 67 million boxes of oranges, as opposed to the 81.5 million harvested the year prior. The decline is being blamed primarily on an incurable disease referred to as citrus greening, which is also affecting the state of California.

The United States is the largest importer of steel in the world, importing 30.1 million metric tons in 2016. Canada, Brazil, Japan, South Korea, Mexico and Turkey are the largest steel exporters to the U.S. and collectively account for about 65 percent of steel imports.

In 2002, then-President George W. Bush placed a tariff of up to 30 percent on steel imports. The EU threatened to place billions in tariffs on exports and led several countries across the globe in a lawsuit against the U.S., which eventually led Bush to rescind the tariffs in late 2003.