The EU May Tax Bourbon in Retaliation for a Trump Steel Tariff

The Department of Commerce estimates that over 30 percent of the steel in the United States is imported. With domestic steel plants operating at only 71 percent of capacity, there’s a direct line to be drawn – and Donald Trump has drawn it with one of those gigantic Sharpies. In a weird conversation with journalists that was originally off the record and retroactively put on the record – an unusual procedure – Trump told reporters that he was considering both tariffs and quotas to protect U.S. steel. The EU, according to the Financial Times, is preparing a response.

Though Trump specifically calls out China and Russia as major problems in imported steel, neither of those countries are in the top three countries exporting steel to the U.S. – those would be Canada, Brazil, and South Korea. And while none of those are EU members, representatives from the EU told the Financial Times that they would respond in kind to any tariffs on steel.

The EU, reports the Financial Times, is crafting a list of possible U.S. exports to tax for that “in kind” response, and the likeliest candidates come from the agricultural field. (The U.S. does not export much steel to the EU, and only about 4 percent of U.S. steel imports come from Germany, so an eye-for-an-eye tax wouldn’t make sense.) Goods like orange juice and dairy products are specifically called out, but the most interesting is one of the U.S.’s most treasured products: bourbon.

Bourbon exports to the EU make up about $130 million; much lower than the estimated $1.5 billion from German steel exports to the U.S. But what makes this worse is that a tax on bourbon would hit the U.S. in a very specific location: 95 percent of bourbon is made in Kentucky…the home state of Senate majority leader Mitch McConnell. Perhaps the EU thinks that anger from his constituents may motivate Senator McConnell to change his mind on the steel issue? Maybe.

A letter from leading economists implored Trump not to enact a steel tariff, claiming that “Additional steel tariffs would actually harm the U.S. economy,” and would damage relationships with important trading partners like Canada and Brazil.