The recently-confirmed import tariffs from the second Administration of President Donald Trump could have serious consequences for beverage alcohol in the US, but the exact picture is complex, nuanced and subject to a host of uncertainties.
Now that tariffs have been introduced on imports from Canada and Mexico – and potential EU tariffs are under discussion – a number of single-origin alcohol categories are most at risk – products with a legally-protected designation of origin, meaning that they cannot be ‘re-shored’ and produced in the US.
These include agave-based spirits, Canadian whisky, Irish whiskey, cognac, champagne and prosecco. Mexican beer imports would also be affected. The UK is trying to negotiate a separate trade deal with the US to head off tariffs to cover categories such as scotch whisky.
However, domestically-produced categories in the US could be set to benefit from their price advantage over imported rivals, assuming that the extra costs from the tariffs are passed on to consumers.
As of 4 March, tariffs of 25% have come into force against goods from Canada and Mexico, alongside the extra 10% tariff for China. President Trump has also promised to introduce 25% tariffs on imports from the European Union, although the timing of this remains unclear.
The moves are sparking retaliatory action from the countries affected, including the introduction of tariffs on US exports, although news stories around this are still developing.
“The second Trump Administration’s policies on tariffs will almost certainly be net negative for total beverage alcohol (TBA) in the US market, with global implications likely to be more limited,” says IWSR‘s US president, Marten Lodewijks. “There is major uncertainty about the extent of the impact.”
Modelling the various potential scenarios is complicated by a number of unknowns or uncertainties, including the size and scope of tariffs, their duration and the impact of any retaliatory measures.
“Brand owners building planning scenarios for the impact of tariffs can leverage IWSR’s data toolkit and consulting services to obtain a more accurate and efficient view of policy implications.” says Lodewijks
IWSR has a number of tools that can help companies to navigate uncertain times, including ‘US Navigator’, a monthly read of TBA sales in all 50 states; ‘IWSR Bevtrac’, consumer tracking studies surveying US alcohol drinkers twice a year, and the company’s five-year forecasting models with upgraded capabilities due to launch in May.
Spirits – Agave, Canadian whisky most vulnerable
The key spirits that are exposed to the effects of tariffs are large single-origin imported categories into the US, including tequila and other agave-based spirits (Mexico), Canadian whisky (Canada), scotch whisky (UK) and cognac (France). Taken together, these four accounted for approximately 70% of all spirits imports by value into the US in 2023, according to IWSR data.
The US is a key market for all of these, but to differing degrees. The country accounts for 69% of exports by value for agave-based spirits, and 79% for Canadian whisky. Meanwhile, 37% of Irish whiskey exports go to the US, while for cognac and scotch whisky, the US share figures are 26% and 11%, respectively.
The most vulnerable price tiers are likely to be premium and super-premium – they are more impacted by ad valorem tariffs than standard-and-below products, and the consumer base for higher price tiers (ultra-premium-and-above) tends to be less price-sensitive.
“Tequila is the most heavily exposed spirits category in terms of export reliance on the US, and being skewed to the premium/super-premium price tiers that would suffer a heavier hit from an ad valorem tariff,” says Lodewijks. “However, our data shows that the price tier exposure for tequila sales differs considerably by individual state, with certain smaller states – such as Ohio and North Carolina – punching above their weight in terms of higher-end tequila sales.”
The tariff threat has arrived just as the US agave spirits boom cools. According to ‘IWSR Bevtrac’ consumer research conducted in the second half of 2024, all income groups are increasingly withdrawing from super-premium-plus tequila.
The risk to Canadian whisky, meanwhile, is mitigated by its strong presence in standard-and-below price tiers, which would be less impacted by tariffs. However, the category will face competition from the presence of American whiskey, as well as whiskies imported from countries unaffected by tariffs.
Scotch and Irish whiskies are heavily exposed to the premium price tier, which has already come under significant pressure from the impact of inflation on consumer purchasing power, and which stands to lose the most to downtrading. However, scotch is currently not due to have tariffs reinstated until 2026.
“By contrast, American whiskey, vodka and rum, all of which are mostly or completely produced in the US, should expect to see gains in domestic consumption as a result of tariffs,” says Lodewijks. “Also, standard-and-below price tiers skew more to domestic production, so a healthy proportion of these segments will benefit from avoiding tariffs altogether.”
Exporters of US-made spirits face the threat of retaliatory tariffs, although IWSR believes this may be mitigated by the time that it takes such measures to be enacted, and the high levels of tariff-free inventory already in the supply chain – which are likely to be expanded further before tariffs are passed on. Furthermore, only a relatively small number of US spirits brands have global distribution.
Wine – Champagne and prosecco at risk
Still wine exports to the US by value are spearheaded by Italy, France and, to a lesser extent, New Zealand. For sparkling wine, Italy and France are hugely dominant, with prosecco and champagne to the fore.
“If tariffs are imposed on the EU, this could have a serious impact on prosecco and champagne exports to the US,” explains Lodewijks. “However, US-produced wine is mainly consumed domestically, and should benefit from a competitive advantage on price.
“That same rationale would apply to other exporters to the US from outside the EU. Wine producers in Australia, New Zealand, Chile and Argentina should all benefit – provided they escape US import tariffs, as they have done previously.”
Beer/RTDs – Mexican imports under pressure
The US beer market is much less exposed to the threat of import tariffs, simply because the vast majority of brands are produced domestically. The major exception to this is a handful of high-profile Mexican beer imports.
“Meanwhile, RTDs too are almost entirely produced in the US,” adds Lodewijks. “As such, they will be unaffected by tariffs and should continue to grow. They may even benefit from price increases for imported spirits, potentially attracting more people to try spirit-based RTDs.
“As a whole, US domestic beer and RTDs should steal share from imported beer – and possibly spirits too.”
