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This story was updated Feb. 3.
President Donald J. Trump hit pause on his threat to levy 25 percent tariffs on all goods from Canada after the U.S. and Canada agreed to negotiate for 30 days. The new trade duties had been scheduled to take effect on Feb. 4. The Canadian government had threatened 25 percent tariffs on many U.S. products in response, including all alcoholic beverages, potentially raising prices on American wines and whiskies.
Similar tariffs on Mexico were paused for one month after negotiations between the two nations’ governments, sparing price hikes on Tequila, mezcal and Mexican beers for now. The White House still plans to impose 10 percent tariffs on all Chinese products. The Administration justified the moves as a response to what it has declared a national emergency of illegal immigration and drug smuggling.
For now, wineries can only wonder if they will be collateral damage in this trade dispute. The drinks industry had hoped to gain an exception from the new tariffs, but those pleas were denied. Trump also said he intends to impose tariffs on the European Union soon, in another move with significant implications for wine and spirits.
Canadian Retaliation
Trump had announced the tariffs on Canadian and Mexican goods on Feb. 1, and Canadian Prime Minister Justin Trudeau declared just a few hours later that Canada would impose 25 percent tariffs against $155 billion worth of American goods in response. “Like the American tariffs, our response will also be far-reaching and include everyday items such as American beer, wine and bourbon,” Trudeau said in a press conference.
The premiers of both Ontario and British Columbia announced that American alcoholic beverages would be removed from the shelves of the provinces’ liquor stores. “As the only wholesaler of alcohol in the province, LCBO [the Liquor Control Board of Ontario] will also remove American products from its catalog so other Ontario-based restaurants and retailers can’t order or restock U.S. products,” Ontario premier Doug Ford posted online on Feb. 2. Wines and Bourbons began disappearing before the pause was announced, replaced with signs urging shoppers to buy Canadian goods instead.
A Major Market for American Wine
The trade war, merely paused for now, comes at a time when many wineries are facing a challenging market, with wine sales declining and inflation and high interest rates raising the cost of businesses. And Canada is a critical market.
“Canada is the single most important export market for U.S. wines, with retail sales in excess of $1.1 billion annually,” said Robert P. Koch, president & CEO of the trade group the Wine Institute, in a statement. “Wine is one of the U.S.’s most highly value-added agricultural exports, so any loss of access to the Canadian market will damage the entire U.S. wine sector. Our wineries have spent decades building market share and brand loyalty across Canada. These actions put all of this at risk. We urge both governments to work together to resolve this dispute as soon as possible to minimize the economic harm.”
A drinks trade coalition Toasts Not Tariffs—representing U.S. alcohol producers, wholesalers and retailers—released a letter on Feb. 2 urging President Trump to exempt wine and spirits from being tariffed.
“Given the unique nature of the U.S. wine and spirits sectors, the heavy dependence of U.S. restaurants and other small businesses on the sale of these products, and the challenging U.S. marketplace, we respectfully request that wine and spirits be excluded from any new or universal tariffs,” the trade group said in a letter to the White House. “Importers, distributors, retailers—and especially restaurants—operate on razor-thin margins and rely on the profitability of alcohol sales for their survival. New tariffs on imported wine and spirits would harm, not help, American businesses, threatening the livelihood of tipped workers and small businesses across the country.”
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