The front line in the trade war runs through Knob Creek
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It's bad news for Jack Daniels & co.

By Geoffrey Smith
July 7, 2017

The Kentucky bourbon industry and Florida’s orange farmers could be among the first victims if President Donald Trump decides to start a trade war.

The Financial Times reported Friday that the European Union is already drawing up a list of candidates for countermeasures if Trump imposes import tariffs on steel and aluminum products in the name of national security, as he has threatened to do. It said bourbon whisky, orange juice and other agricultural products were likely to be near the top of the list.

Trump has framed his threat of import duties as a way to stop China flooding the global market with steel that it can’t sell at home, but the EU, Japan, Canada and South Korea are all concerned that their steel industries will also be affected.

EU Trade Commissioner Cecilia Malmström has said the EU would “have to respond” if its interests are harmed, but any retaliation is likely, ultimately, to depend on what exactly the U.S. decides.

Usually in global trade, such tit-for-tat countermeasures are planned to create the maximum political effect while limiting the actual economic disruption as much as possible. The reason for Kentucky being targeted is likely two-fold: it makes a point about the importance of international trade in a region which came out strongly for Donald Trump and his brand of ‘America first’ policies; and also because it’s home to Senate Majority Leader Mitch McConnell, which gives it extra embarrassment value from a European viewpoint.

The Kentucky bourbon industry supports some 17,500 jobs in the state and contributes $825 million a year to federal, state and local tax coffers, according to the Kentucky Distillers’ Association. Overall bourbon exports last year are over $1 billion a year. That figure includes Tennessee-based Jack Daniels, which is owned by a Kentucky company, Brown-Forman Corp.

 

Trade and protectionism are likely to be among the most controversial topics at the G20 summit in Hamburg, Germany. that starts later Friday and continues through Saturday. At a meeting of G20 finance ministers earlier this year, the U.S. delegation forced the group to drop its usual language resisting protectionism. The EU and Japan, which have repeatedly warned the U.S. against turning its back on free trade, signed their own trade liberalization deal Thursday. The move was three years in the making, but the timing was calculated to increase the pressure on the U.S. ahead of the summit.

 

 

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