The Front Lines of Trump's Trade War? Look at Kentucky

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1:40Bloomberg Audio Studios. Podcasts. Radio. News. Governor, thank you for taking the time. Selfishly, it's always just good to get out of D.C. and touch grass, you know, bluegrass or otherwise. Bloomberg's White House reporter Josh Wingrove took a trip down to the Kentucky state capitol a few weeks ago to sit down with Governor Andy Beshear. Welcome to Frankfurt. Thank you kindly. They met inside the old governor's mansion in Beshear's office, which featured some very Kentucky touches. He has a bottle of bourbon with his dog's face on it, sealed. I should note we did not get to crack that. Didn't crack that open.

2:18Heartbreaking. But he also has a KFC bucket with his own face on it. So leaning into the brand a little bit. Bourbon and bluegrass music and Kentucky fried chicken. These are just a few of Kentucky's most famous exports. But Josh says there's a lot more to Kentucky's economy than that. The one-time coal-producing center is also an auto-manufacturing juggernaut, an aerospace hub, and one of the country's most prolific importers. Kentucky kind of flies under the radar as a trade-exposed state. Its imports are the top in the country as a share of their economy. You might think Michigan or other states have jumped to mind more as big manufacturing states, but it's Kentucky.

3:01And right now, it's in the crossfire of the trade war. The stuff they are building is being hit with import tariffs, and the stuff they're selling, namely bourbon, but other things, including aerospace, is being affected as well with potential countermeasures, countries boycotting or applying their own tariffs. Though the pace of tariff news has slowed since the summer, the whiplash isn't over. On Friday, President Donald Trump threatened a new 100 % tariff on Chinese goods. But then, over the weekend, he softened, signaling the U.S. would be open to further negotiations. And next month, the Supreme Court will start hearing oral arguments in a case that will decide whether Trump's reciprocal tariffs are even legal.

3:40As Trump's tariff policies start to hit Kentucky's key industries, the red state's Democratic governor has been vocal about the consequences for his constituents. The impacts are hitting the economy in Kentucky and across the country. They haven't been fully felt yet, and part of that is because it's constantly changing. But what we will see in the United States is increased costs on our people. Bashir is one of the only Democrats in Kentucky state leadership. But he's not the only Kentucky politician who's taking the administration to task over Trump's trade war. There's Kentucky Senator Rand Paul.

4:19So the number one issue I get wherever I go in the state is tariffs are killing the family farm, tariffs are killing the bourbon industry, tariffs are killing the cargo transport industry. And Kentucky's other senator, Mitch McConnell. Put me down as a guy who hopes the trade war isn't very long, because if it's prolonged, it means higher prices for all of you, for everything. State Congressman Thomas Massey has been a vocal tariff critic too. All three of them, Republicans. The one thing they seem to agree on down there is tariffs are a bad idea, or at least the way they're being done is a bad idea.

4:58I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, more from Josh's interview with Kentucky Governor Andy Beshear. What Trump's trade war and domestic policy agenda means for the red state's economy and for its voters.

5:19President Trump announced his sweeping global tariffs a few months into the start of his second term. April 2nd, 2025 will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again. After months of negotiations, escalations, downgrades, and delays, most of those tariffs went into effect on August 7th. But that hasn't been the end of the story. So we've now gone from across the board to reciprocal, to industry-specific, to company-specific, and now we are at product-specific. Kentucky Governor Andy Beshear again.

6:05The only thing that doesn't change is that it's going to change every day. Bloomberg White House reporter Josh Wingrove wanted to talk to Governor Beshear because Kentucky is in some ways a microcosm of the rest of the U.S. as local economies adapt to these shifting tariff policies. But Kentucky is also uniquely vulnerable. Kentucky is a crossroads state, right? It is near the manufacturing heartlands of Michigan, Ohio, but a gateway between the coasts and sort of middle and southern America. And that's why they have a lot of logistics hubs type of business. That's why they have a lot of manufacturing.

6:43Ford has a huge plant there. Bourbon, of course, has been an iconic part of their industry as well. It's sold a lot domestically, but it's sold a lot internationally too, and is often targeted because countries tend to look for sort of tangible things to hit, whether it's Florida orange juice or Kentucky bourbon. And that's why these tariff fights tend to bite in places like this. Levies on imports are hitting the state's manufacturing sector, while retaliatory measures from other trading partners are affecting the state's exports. So, for instance, bourbon is an export, but is being impacted because people are simply refusing to buy it because they're ticked off.

7:20Kentucky's main export country is Canada. The Canadians are up in arms right now because Trump is more or less trying to annex the country. And then there's individual tariffs, like on steel and aluminum. Well, if you have a car plant, you use a lot of steel and aluminum. And so Ford is navigating that.

7:38Ford employs more than 10 ,000 workers in Kentucky. And Bashir told Josh, the state depends on the company's continued success. Ford has been a huge investor in Kentucky over the last five years, five and a half years since I've been governor. Now, we also have the largest Toyota manufacturing facility in the world in our state. What Ford is saying is that they believe that this chaotic policy that is not being done through normal channels, that is not having the experts that understand the auto industry and how to create a level playing field, they're not being consulted. Trump says his tariffs are designed to help revive American manufacturing.

8:18The industry has lost more than 5 million jobs and nearly 70 ,000 factories since the 90s. But in Kentucky, manufacturing is a major driver of its economy. 13 % of the workforce is employed in the sector. And Bashir told Josh that in his state, Trump's tariff policies are putting that success at risk. The president might think he's helping domestic manufacturers, but in fact, he's hurting them. People think about manufacturing think about giant plants, right? But manufacturing can be pretty small, too. And you think of like small companies that, let's say, input their materials from China, build it in America, sell it in America, employ Americans.

9:00What should that company do? because right now they're kind of caught in the middle of it. Trump thinks that if you want to avoid tariffs, you're just going to build a big new factory in a place like Kentucky. Well, you might, but then you have to pay the other tariffs that he's charging, for instance, on steel to build that factory. And that might just get too complicated for you. Or you might be doing it at a time when there's a lot of questions about the economy and you're worried about consumer demand, you know, maybe falling. And you're like, I know I'll just kind of hold off and wait. And if every company holds off and waits and suddenly things grind to a halt pretty quickly.

9:31And so I think that that is why manufacturing is so often seen as a canary in the coal mine, if you'll excuse the completely inadvertent Kentucky pun, because it is sort of a bellwether. I'm wondering if Bashir sees any benefits for domestic automakers from tariffs when it comes to helping them compete globally, for example. How does Bashir see the long game here and how does he talk about it? So it's funny because one of the things Trump has done is sort of shift the consensus on this, right? Republicans were the anti-tariff party until Donald Trump came along. So Governor Beshear's position is steel and aluminum tariffs, for instance, can be appropriate when targeted.

10:11When you have China dumping steel and or aluminum, then a targeted tariff that is done through the regular process that brings in the experts on the amount, But those can be helpful to ensure the U.S. economy has certain manufacturing that is critical to our national security. Without being hollowed out by the Chinese. Exactly. So for Governor Beshear, on the auto piece, it's interesting because, yeah, I think Trump likes the idea of tariffing foreign autos to help domestic automakers. The problem is the sequencing so far has hurt domestic automakers, right? Ford in Kentucky is the domestic automaker that makes most of its cars in the U.S.

10:50And right now they are at a disadvantage against the Japanese rivals because of the way the tariffs have all shaken out. But it is complicated because GM, for instance, is a major importer, including from South Korea. And so they're kind of caught in the middle of it, too. If they pay a 15 % tariff on a car they make in South Korea and pay input tariffs on cars they make in America and have to have a higher paid worker, this or that, it might actually incentivize them to shift more production to South Korea than having it in places like Kentucky or wherever in the United States. Bashir is far from the only one raising concerns about the way Trump's tariffs have been rolled out.

11:26Following a wave of lawsuits filed by businesses and state attorneys general, the U.S. Court of International Trade ruled the president does not have the authority to use the International Emergency Economic Powers Act to impose tariffs. There's a stay on the case while the Trump administration appeals to the U.S. Supreme Court, which will start hearing oral arguments on November 5th. My hope is that the lawsuit brought by Democratic attorneys general, both in the International Court of Trade as well as in a district court, reaches the Supreme Court and they rule what any other Supreme Court would have, that the president doesn't have the power to change tariffs on a whim.

12:08This is a president who wants to simply set any tariff, any time, for any reason. And the law doesn't allow that. After the break, Kentucky's manufacturing industry is up against more than just tariffs. What a rollback of green energy policies means for the Kentucky automakers who've gone all in on EVs.

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14:08Kentucky wasn't always the manufacturing hub it is now. For most of the 20th century, it was known as one of the country's top coal producers. When you look at the coal miners of eastern Kentucky, West Virginia, and elsewhere, they mined the coal that powered the Industrial Revolution, that created the strongest middle class the world's ever seen, that powered us through two world wars. But when the U.S. started investing more in green energy sources, Kentucky Governor Andy Beshear says a lot of miners were left behind in the transition. Yet when the energy economy changed, they weren't thanked.

14:41In many instances, they were told they were doing something bad. And the new jobs didn't go where the old jobs were. Everybody was talking about environmental justice. At the time, no one was talking about economic justice. And these people that broke their backs to help build this country were left behind. Bashir told Bloomberg White House reporter Josh Wingrove that his priority now is diversifying Kentucky's economy. I recognize that climate change is real, and I'm the first Kentucky governor that's ever said that phrase out loud. I say it because it's true. And we're not likely to see a rebound in older areas of energy generation.

15:19Why? Because every company that's coming to Kentucky is still telling me that they want to be more sustainable. They're still asking for more diversity in their energy portfolio. And so for me, if I want to recruit that next set of jobs, I've got to make sure that we have multiple means of energy production, including more renewables. A large part of Kentucky's industrial diversification has come in the form of electric vehicles. Since Bashir took office, the state has become a key player in the EV supply chain, attracting billions of dollars in EV-related investments in cars, parts, and batteries.

15:58One of the most significant EV-related projects in Kentucky is a joint venture between South Korea's SK Onn and Ford called Blue Oval. Side note, by the way, I think we're supposed to pronounce Blue Oval as like Louisville. Blue-o-ville? Like, I think it's a pun. Oh, OK. Blue-o-ville. Louisville. Louisville. I think as non-Kentuckians, let's say Blue Oval, but I think it is a nod to the local pronunciation of Louisville. No, thank you. After receiving a nearly$10 billion loan from Biden's Department of Energy at the end of last year, Blue Oval began producing batteries for Ford's F-150 Lightning pickup truck in August.

16:38And so to us, it was incredible first to secure Blue Oval. And that has two plants. Kentucky One is up and operating already over 1 ,400 employees. Kentucky Two, they're fully constructing. The only question is when it will go into operation. And what that's done is brought in billions of dollars of additional investment, a supply chain that doesn't currently exist. But since Trump was sworn in, the battery plant has been facing headwinds. Amid a broader rollback in green energy investment, the federal EV tax credit expired in September. and demand for electric vehicles has been slowing. That's affected demand for Blue Oval's batteries.

17:18It is sort of facing uncertainty because it was meant to build batteries for the F-150 Lightning, Ford's electric truck. Demand for that has just not been anywhere near where Ford thought it would be. Ford lost about$5 billion on its EV business last year, and the company said it could lose even more this year. Meanwhile, Trump's immigration policies are also ratcheting up uncertainty for the Blue Oval project. In September, ICE officials raided a Hyundai battery plant in Georgia. They arrested 475 people, mostly South Korean immigrants. And so the big question right now is what impact does that Georgia raid have on every other Korean project in the country, including the Blue Oval joint venture in Louisville, including other South Korean projects in Kentucky, and future projects?

18:05There's a potential chilling effect. Chilling effect. It is a huge diplomatic crisis. Hanging in the balance of all this is President Trump's trade deal with Korea. Its tariffs and its immigration and its investment and its trade. I mean, it's all kind of one story. Despite these challenges, Josh says Ford is committed to building its EV business in Kentucky. It's spending$2 billion to build budget electric cars at its Louisville plant. And as for the Kentucky governor, his faith in the industry hasn't been shaken. What you see is Ford, and what I see is every other major manufacturer, is still continuing to make EV investments.

18:43A lot of people have tried to fight the future, and no one's ever won. EVs are where the world is going in terms of automotive. The question is the pace or speed at which it moves. In Kentucky, we also know what happens if you aren't on the forefront of change in an industry. I will not let that happen in the automotive sector. Bashir is a Democrat who's betting the farm on EVs. Perhaps it's not surprising to hear him critique Trump's protectionist, oil and gas-heavy economic agenda. But Bashir told Josh that when the economic consequences of these policies start to hit Kentucky, he believes both Democrats and Republicans will feel them.

19:23Democrats, including Governor Bashir, are still trying to figure out how to talk about the tarot question, in part because it's not totally clear where their own party will land, in part because consumers aren't really yet totally seeing it in the sticker shock. They still see the inflationary numbers that they've been dealing with for years. And, you know, they assume the prices have just stayed high, but that sticker shock is going to come. And I think then we'll see Democrats ramp up their messaging on it. I don't think you'd find many voters in America who said that they went to the polls and voted because of tariffs.

19:54What he told them was he was going to make paying bills at the end of the month a little bit easier. But he's governed in any way but what he promised. Trump is already declaring victory, saying we're not seeing inflation yet. But so many people, including Governor Beshear, but other industries and companies are saying it's just not there yet because the tariffs are changing so frequently. The companies haven't decided what to do yet, but that eventually some or all of that is going to get passed on to the consumer. And that's when this is, I think, going to become more of a potent political issue.

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