The beverage alcohol industry is often considered recession-proof and largely immune to the vagaries of economic trends and disruptions. However, it is not immune to the impact of tariffs and the resulting responses from foreign markets. The multiple headwinds created by aggressive tariff policies and the treatment of our trading partners have hit the industry hard.
While I usually focus on global deep-sea shipping in the annual outlook, this year the focus is on trade policy and its tariff impact — which have taken center stage. (Global shipping, perhaps, remains the one bright spot for shippers!) The fact that Canada has removed all US-origin alcoholic beverages from its shelves has resulted in an 85% plunge in US spirit exports and an over 90% drop in US wine exports. Combined, these declines have cost the US economy more than $400 million. As is usually the case with tariffs, small companies have borne the brunt of the damage.
In response, the beverage alcohol industry has united in a coalition representing more than 50 associations to fight the tariffs and highlight their severe impact, as well as the trickle-down effect on both importers and exporters. It is not just the wineries, distilleries or importers who suffer — trucking companies, warehouse workers, restaurants and retail outlets are all adversely affected by a downturn in trade.
Similar to many industries impacted by tariffs, the beverage alcohol sector has adapted by negotiating with suppliers, exploring first-sale options and absorbing tariff costs where possible. Beverage alcohol does have one slight advantage: it is uniquely terroir-driven. The production of specific products cannot simply be relocated — whether champagne or tequila, these beverages are inextricably tied to their place of origin. Their value lies in the soil, climate and topography that make them unique. The industry will survive, and trade will continue, but some businesses will not withstand the costs imposed by tariffs.