Consumers lose when tariffs enter the equation

Published 11:23 am Tuesday, June 26, 2018

It seems there’s no doubt about it. The tariffs are coming.

And the result is simple: When tariffs come, consumers lose.

We’re talking about tariffs on foreign goods as well as other countries imposing tariffs on American-made products. Of greatest interest to Kentuckians, bourbon and other whiskeys are in the package of tariffs other countries plan to impose on America.

While there’s good news in the fact that Buffalo Trace plans to continue $1.2 billion of capital investment over the next decade, the total economic output of the distilling industry in Kentucky — estimated to be $8.5 billion — will surely take a hit if several countries implement tariffs. Ranked by value, whiskey is the commonwealth’s ninth largest export. The industry has been fortunate to see a sharp uptick in demand and, therefore, revenue.

Tariffs threaten to halt or slow that progress.

Mexico, for example, has implemented a 25 percent tariff. Imagine if similar tariffs go into effect by July 1 from countries like Canada and China.

The Kentucky Distillers Association’s latest economic impact study states the largest purchasers of Kentucky whiskey are Canada ($7.26 million), the United Kingdom ($2.56 million), Mexico ($2.3 million), China ($1.93 million) and France ($1.773) million. Review a list of the countries where tariffs are proposed and you’ll see many similarities to the list of top importers of Kentucky whiskey.

If that tariff is 25 percent, for example, a purchaser in that country would pay 25 percent more.

A $50 bottle of bourbon might suddenly cost $62.50 for no other reason than the country is retaliating against President Donald Trump’s tariffs on foreign steel.

The result? Faced with steep price hikes, consumers may choose to skip purchasing Kentucky bourbon and try another liquor.

Protectionism may be President Trump’s approach to trade, hiking the price of foreign-made goods in an attempt to make them more expensive than American products, but it may come with a cost that will spell trouble for sectors of the economy. America doesn’t consume everything it creates and, if foreign consumers choose to stop purchasing products subject to retaliatory tariffs, our country may see some companies cut jobs to compensate for a loss in profit.

Tariffs may seem like a good idea in theory, but they often create a lose-lose situation for consumers across the board. Americans will pay more for products made with foreign goods and those abroad will pay more for products like Kentucky bourbon.

The State Journal