Spirits Industry Seeks Tariff Exemption Amid Trump's Universal Tariffs

The spirits industry is bracing for potential impacts as President-elect Donald Trump has announced plans to impose 25% tariffs on goods from Mexico and Canada. The Distilled Spirits Council of the United States (DISCUS) has warned that these tariffs could lead to retaliatory measures and weigh down an already struggling industry. As a result, the spirits industry is exploring options to seek exemption from these tariffs.

In 2023, the U.S. imported $4.6 billion worth of tequila and $537 million worth of Canadian spirits. With a 25% tariff, consumers could face higher prices for these popular spirits, leading to decreased demand and potential job losses across the industry. In 2023, Tequila/Mezcal supplier sales in the U.S. reached $6.5 billion, while Canadian Whisky supplier sales totaled $2.3 billion. These tariffs could hinder the recovery of bars and restaurants, which have been working to bounce back from the pandemic's economic impact.

The spirits industry is not alone in its concerns. Economists are generally skeptical of tariffs as a way to raise government revenue. Carl B. Weinberg and Rubeela Farooqi, economists with High Frequency Economics, have warned that energy, automobiles, and food supplies will be particularly hard hit by these tariffs. They believe that imposing tariffs on trade flows into the United States without preparing alternative sources for the goods and services affected will raise the price of imported items at once. Since many of these goods are consumer goods, households will be made poorer.



However, the spirits industry is looking for ways to mitigate the potential negative impact of these tariffs. By leveraging 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. The industry is urging all governments to work together to reach an agreement that ensures tariffs are not imposed on spirits products.



In conclusion, the spirits industry is facing potential challenges due to President-elect Trump's proposed universal tariffs on Mexico and Canada. To mitigate these impacts, the industry is exploring options to seek exemption from these tariffs. By leveraging the USMCA and working together with other governments, the spirits industry hopes to protect jobs and consumers from higher prices. As the industry navigates these challenges, investors should closely monitor the situation and consider the potential impacts on their portfolios.