On Monday, President-elect Donald Trump announced his plans to impose a 25 percent tariff on all imported goods from Mexico and Canada on his social media platform Truth Social. Among countless other products, the new measure would impact both the tequila and Canadian whisky markets.
“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump stated in the post. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country (sic)!”
What This Means for Tequila, Canadian Whisky, and American Hospitality
According to The Washington Post, Mexico, Canada, and China are the United States’ top three trading partners. Not only would these tariffs impact essential goods like produce, cars, gas, machinery, and electronics, but they would also prove a crushing blow to the agave spirits and Canadian whisky industries.
In 2023 alone, the U.S. imported $4.6 billion of tequila and $108 million of mezcal from Mexico, according to the Distilled Spirits Council of the United States (DISCUS). On top of that, domestic tequila consumption rose from 19.7 nine-liter cases in 2019 to a staggering 30.6 million nine-liter cases in 2023. Considering our friends up north, the U.S. imported $537 million worth of Canadian spirits last year.
Given that the tariff charges would be paid by the importer — not the foreign exporter — the import companies are likely to pass the additional surcharges onto consumers to protect their bottom lines.
“They’ll be very clear with any administration and any government that if you increase tariffs on our products, we are going to pass it on to your citizens,” Laurence Whyatt, head of European beverages research at Barclays Investment Bank, told The Spirits Business. “This is not to hit us. And in the same way, if any government were to lower tariffs, they would pass it on to their citizens.” The silver lining — if we can even call it that — is that the tariffs will be applied to the import price of goods rather than the retail price, so a 25 percent tariff doesn’t directly equate to a 25 percent price markup on the shelf.
Another major rallying cry from Trump’s recent campaign — and the motivation behind enacting these tariffs — was his vow to create more job opportunities for U.S. workers. However, if the tariffs go through, they could instead harm that prospect. Like bourbon, tequila and Canadian whisky are designated as regionally-distinctive products under the United States-Mexico-Canada Agreement. Therefore, authentic substitutes for those spirits cannot legally be produced stateside. On top of that, the American hospitality industry sees nothing to benefit from the ordeal.
“At the end of the day, tariffs on spirits products from our neighbors to the north and south are going to hurt U.S. consumers and lead to job losses across the U.S. hospitality industry just as these businesses continue their long recovery from the pandemic,” DISCUS president and CEO Chris Swonger wrote in a statement sent to VinePair.
Retaliatory Tariffs and Backlash from the North and South
Already, politicians from both Canada and Mexico have spoken out against the impending tariffs, with Mexican president Claudia Sheinbaum suggesting that retaliatory tariffs could be in the cards. “President Trump, it isn’t with threats or tariffs that we resolve the migratory phenomenon or the abuse of drugs in the United States,” Sheinbaum said at a Tuesday morning news conference. “What’s needed to confront these great challenges is cooperation and understanding. Any tariffs imposed by one side would likely prompt retaliatory tariffs, leading to risks for joint enterprises.”
Canada’s deputy prime minister, Chrystia Freeland, and public safety minister, Dominic LeBlanc, also shared a joint statement emphasizing the nation’s diligence when it comes to border security.