After more than a decade of expansion, the latest report from the Kentucky Distillers’ Association says decreases in demand for bourbon and other spirits brought on by trade policies and shifting consumer tastes could slow growth in one of the Bluegrass State’s signature industries.
The distillers that make bourbon and other spirits contribute more than $10 billion in annual economic impact to the commonwealth, according to the latest KDA data. But KDA president Eric Gregory said the industry’s momentum in recent years is at risk.
The group released a report earlier this month that examined data from 2024 and part of 2025 surrounding employment, sales and inventory.
The past two decades have been a boon for Kentucky distillers, as the sector has recorded significant growth in the Bluegrass State. KDA’s report found that state economic impact from Kentucky’s distilling industry grew from $1.8 billion in its 2012 report to $10.6 billion in 2024.
Gregory said much of the increase in demand for bourbon – a product that has to be made in the United States, among other classification requirements – and other Kentucky spirits over the past decade has been driven by international markets. But retaliatory tariffs placed on American spirits in response to trade policies enacted by the Trump administration in 2025 led to decreases in exports to markets that traditionally buy Kentucky bourbon and other American-made liquors.
Kentucky whiskey exports were down around 28% during the first half of last year compared to June 2024, according to the KDA report. Had that decreased export trend continued for the whole year, Gregory said that would have lowered the Kentucky distilling industry’s economic impact by an estimated $225 million.
“That’s not just going to impact distilleries. That’s going to impact a lot of supply chain jobs down the line, which include our farmers, our cooperages, our transportation firms, the truckers that take our products to and from liquor stores and restaurants and bars and things like that,” he said. “Those would all be at risk if this decline in exports continues.”
Exports improved from July through October 2025, the latest month with export data available. However, the report found that the commonwealth’s whiskey exports were still down 12% in January to October 2025 compared to the same period the year prior. Also, exports to Canada and the European Union – two traditionally large markets for Kentucky spirits – were down 42% and 13% respectively in that same time frame.
It’s not the first time that tariffs have affected Kentucky spirit exports. In response to tariffs imposed by the first Trump administration on steel and aluminum imports, the European Union placed a retaliatory tariff in 2018 on American whiskey products, including bourbon.
Kentucky’s bourbon and whiskey exports peaked in 2019 at $488.6 million. The following year, Kentucky spirit exports decreased by 35%, which the KDA report attributes to these tariffs. While the EU rescinded this whiskey tariff in 2022, Kentucky’s whiskey exports were still 26% lower in 2024 compared to the state’s peak five years earlier.
Kentucky recorded its largest spirit exports total of the last 15 years in 2024 with $755.5 million.
However, the signature Bluegrass State spirit makes up a smaller share of export numbers than it used to. Bourbon and other whiskeys accounted for around 48% of Kentucky spirit exports in 2024, with the rest coming from vodka, rum, gin, brandy, liqueurs and cordials. At Kentucky’s whiskey export peak in 2019, it made up roughly 86% of the state’s total spirits exports.
While there is no minimum requirement for how long bourbon has to be aged in a new oak barrel, distilleries typically age it for at least two to four years – and sometimes longer for special releases. Because of that, Gregory said distilleries have to forecast what bourbon demand will look like years down the road to inform decisions about how much they need to produce at any given time. He said changes in trade policies can impact business plans that have been in the works for years.
“It’s already a little bit of a crystal ball industry anyway. And, when you add all this uncertainty over global trade right now, it just complicates that even more,” Gregory said. “We’re hoping that we can get everybody back to a system of reciprocal trade, where ‘you don’t put a tariff on me and I don’t put a tariff on you,’ when it comes to whiskey.”
Gregory said Kentucky distillers have their fair share of challenges in the near future. In addition to unpredictability with regard to global trade demands and policy changes, he said distillers are also noticing that younger generations are not drinking alcohol as much as their predecessors.
“There’s a lot of competition out there for leisure dollars, everything from sports gambling to gaming, and even in some states, there’s, you know, marijuana that’s been legalized. A lot of things are kind of hitting at once that are having some effects on [spirits] sales and exports that we’ve really never seen before,” Gregory said.
In response to slowing demand, some Kentucky distilleries have cut back on production. Jim Beam announced late last year that it is pausing whiskey production at its main Clermont facility for 2026. Bulleit’s parent company temporarily halted production for a few months at its Lebanon site in 2025, a move a spokesperson said was meant to “support our efficiency and productivity goals.”
While there are potential causes for concern, Gregory said the report isn’t all negative for Kentucky distilleries.
More than a third of Kentucky counties are now home to at least one distillery. These producers are also using more corn – one of bourbon’s main ingredients – from the Bluegrass State than ever before. KDA members reported that 84% of their corn came from Kentucky farms, up from 70% in the group’s previous report in 2024.
The Bluegrass State also has the largest number of the nation’s distilled spirits workers, making up more than a quarter of the nation’s employment in that sector. Tennessee has the second-largest share, accounting for 8.4% of the U.S.’s distilled spirits employees.
Gregory said, despite some of these challenges, the KDA report still illustrates that bourbon “remains a key and substantial driver” of Kentucky’s economy.
“The foundation for Kentucky bourbon is strong,” Gregory said. “We’ve been through worse before. I mean, we survived prohibition… as long as ‘Made in Kentucky’ is on the label, I’m confident that we’ll get through and be stronger on the other side with this as well.”
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