Foreign tariffs made US whiskey cheaper in some places

A new study reveals that foreign tariffs imposed during the Trump administration led to cheaper US whiskey in most regions, but actually increased prices in key whiskey production states like Kentucky and Tennessee. In 2018, Trump initiated a series of tariffs and trade wars with numerous countries, including Mexico, the EU, Canada, and China.

These retaliatory tariffs on US whiskey resulted in substantial price increases, as European Union, Canada, and China imposed significant tariffs on imported US whiskey. Carly Burd, coauthor of the study and assistant professor of accounting at North Carolina State University, explains that whiskey's value is heavily influenced by consumer preference, which altered pricing across the market.

As whiskey constituted the majority of US liquor exports pre-2018, the researchers sought to understand how US whiskey producers reacted to the sudden decline in foreign sales. The researchers analyzed sales data from 8,674 stores over 2018, focusing on 2,514 unique whiskey products totaling 11.4 million sales. Compared to the cost of imported whiskeys (used as a control, as they weren't subject to US tariffs), US whiskey prices dropped in most states but rose in Kentucky and Tennessee – states that produce the bulk of US whiskey, where demand remained high for locally-sourced products.

The researchers posit that the inability to rapidly adjust production due to aging requirements for whiskey led producers to adopt a dynamic pricing model. The study, published in the journal The Accounting Review, illustrates how political tensions, trade disputes, and tax changes can impose significant challenges for domestic producers, and how the impact on consumers varies greatly across different regions.