It appears that the American whiskey industry was right to be nervous about Donald Trump‘s tariff threats. The president elect announced on Monday that he would institute a new round of 25 percent tariffs on Canada and Mexico on day one of his presidency, a move that is sure to drive up the cost of tequila and Canadian whisky here and could possibly spark a new trade war in the spirits industry.
Trump’s declaration came via Truth Social, where he said the tariffs were a response to his claims of illegal immigration and drugs coming over the border into the country. “Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem,” he wrote. “We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!” He also said he would impose a 10 percent tariff on all goods coming from China.
This is exactly the kind of move that the American whiskey industry feared would happen, as we reported shortly before the election. Tequila is an incredibly popular category here in the U.S., and has even surpassed sales of American whiskey. Canadian whisky is also very popular, with brands like Crown Royal doing big numbers across the country. These tariffs will very likely lead to retaliatory tariffs on American whiskey, although that remains to be seen, and they do nothing to quell fears about the return of tariffs that could be imposed by the E.U. on bourbon and rye at staggering 50 percent next March.
The Distilled Spirits Council of the United States was quick to respond, noting that the U.S. imported $4.6 billion worth of tequila last year and Mexico was the third largest export market for American spirits, while we imported $537 million worth of Canadian spirits and Canada was the second largest export market. After setting the stage with some appreciative language about Trump wanting to protect American people and jobs, DISCUS CEO Chris Swonger’s statement reiterated what’s at stake. “Our industry has been weighed down by retaliatory tariffs as part of unrelated trade disputes since 2018, which crashed our exports harming thousands of distillers and their farmers across the United States,” he said. “Imposing a tariff on tequila and Canadian whisky from two of our largest trading partners could kick off more retaliatory tariffs on American spirits to Canada and Mexico. Under the United States-Mexico-Canada Agreement (USMCA), tequila and Canadian whisky are designated as distinctive products, similar to bourbon, where they can only be made in their country of origin. Slapping a tariff on tequila and Canadian whisky will not boost American jobs simply because they cannot be produced in the United States.”
Of course, it’s not just about spirits, because there are goods and issues at stake that are arguably much more important like car parts and crude oil. But the reality is that these tariffs will likely have a real negative impact upon the lives of the thousands of people who work in the spirits industry, as well as consumers looking to purchase a bottle, on both sides of both borders. We will have to wait until January to see how this all plays out, but we will report on any further developments as they happen.
