KENTUCKY — Kentucky bourbon producers, who have already had to work through a nonexistent tourism year and production line disruptions due to COVID-19, face a monster of a challenge on the horizon.

Since 2018, American whiskey makers have been sucked into a trade dispute between the European Union and the United States. The EU -- and now the United Kingdom since it seceded from the union -- have imposed a 25% tariff on American whiskey coming into the region. In June, that penalty will automatically double to 50% if the Biden administration cannot reach a deal.

"Anxious -- that's probably the best word for it," said Kentucky Distillers Association President Eric Gregory when asked to describe the mood of local whiskey makers. "When this all started out in 2018, we said we were cautiously optimistic that this was a short-term problem."

Now that the tariff has remained, Gregory said his members, from industry giants to craft startups, have felt the squeeze.

"We predicted that the longer this happened, that the more damage it could do," he said. "And that’s exactly what has happened, as from 2019 through 2020 our exports globally have fallen about 35%, and to the EU they’re down 50%."

Amir Peay owns the James E. Pepper Distillery in Lexington. Just before Christmas 2017, his business poured its first bottle, with a foreign market very much in the plans.

"Essentially, we're frozen," Peay said of his plans to sell abroad. "We're not sure that we can survive."

The potential business death Peay fears hinges on the tariff increase never coming to pass. 25% is hard enough.

Distillers faced mixed emotions this month when The Biden administration and UK leaders cooled down their trade war, which stems from an unrelated dispute over the Boeing Airbus. However, while the UK agreed to suspend tariffs on American rum, brandy, and vodka, the whiskey tariff remains.

In a statement, the US-based Distilled Spirits Council said there is positive momentum, but that whiskey sales to the UK alone were cut in half from 2018 to 2020 -- a $79 billion loss

Still, Gregory found hope as he looked toward the future of the European market.

"There’s somewhat of a guessing game in all of that," he said. "But, there are people who are a lot smarter than me who do that, and they’re still investing in American whiskey. So, that still leads me to hope that we’ll get behind this and there are better days ahead."

Beam Suntory, a U.S.-based spirits company, provided the following statement:

"We’re an innocent victim of a trade war involving matters totally unrelated to distilled spirits, and the tariffs on American whiskey must end, and soon.

Retaliatory tariffs clearly make our products less competitive – especially for Bourbon in markets like the UK and Germany. Reversing these tariffs is our top public affairs priority, and it’s critical that we avoid a doubling of the tariffs by the EU on June 1st. The US and Europe both benefited enormously from the zero-for-zero tariff regime that lasted more than 20 years, and it’s in everyone’s interest that we return to this arrangement.

The good news is, we’re beginning to see some encouraging signs. The US has temporarily suspended tariffs on Scotch related to the Boeing/Airbus dispute, and there appears to be greater willingness on both sides of the Atlantic to reset trade relations, so we’re hopeful that the US, UK and Europe will resolve the tariffs that have disrupted a great American export story."

Headquartered in Louisville, spirit and wine company Brown-Forman has also felt the impact of the tariffs. Director of External and Brown-Forman Brand Communications Elizabeth Conway provided the following statement:

"For Brown-Forman, we have been hurt and unduly impacted by this trade war with Europe. We estimate that our company, based in Louisville, Kentucky, has borne roughly 15% of the entire tariff bill (source: EUROSTAT) levied against the U.S. in response to steel and aluminum tariffs. They have become a big problem for us and [others in our industry] and it's imperative that we get it resolved as soon as possible.

Of course, there is never a good time to suffer additional tariffs. But the fact that tariffs have coincided with COVID has been a real challenge for us, our supply chain, and our partners in the hospitality industry. As we have said many times, we want to see an end to the EU and UK’s retaliatory tariffs on American whiskey exports. And we want to avoid the doubling of tariffs on American whiskey that puts us, a 150 year old American company, at a competitive disadvantage. We are cautiously optimistic that the U.K. and EU tariffs on American whiskey will be resolved."

Years of advanced planning are not optional for bourbon producers. Whiskey distilled now might reach customers half a decade down the road. Kentucky’s distillers hope, by then, their seat at the international table remains valuable.

Editor's Note: Spectrum News 1 received statements from Beam Suntory and Brown-Forman after the initial publication of the story. The statements have been added.