Bourbon and Whiskey Tariffs How Could America’s Favorite Spirits Be Impacted By Tax

With the Trump administration announcing (and then promptly postponing) tariffs on several global importers this week, it’s an extremely uncertain time for the local U.S. whiskey and spirits economy. As the threat of a major trade war looms, sparked by the authorization of executive orders imposing 25% tariffs on liquor from Canada and Mexico, we look at the implications on the industry and how the landscape might look, for both locally produced and imported liquor, should these tariffs come into effect.

What are whiskey tariffs?

A tariff is a tax that the federal government imposes on goods or services imported from other countries. A whiskey tariff is a tax on imported whiskey (all imported liquor from the abovementioned countries is being taxed) coming into the United States, discouraging buyers from purchasing imported goods, and encouraging them to buy local.

The proposed 25% tariff on Canadian and Mexican goods covers all liquor being imported into the U.S. by these countries, the United States’ closest key trading partners. To put this in whisky terms, if a $100 bottle of Crown Royal is imported into the U.S. from Canada then that bottle will incur a 25% tariff on the product cost, payable by the importer to the U.S. government. In other words, a $100 bottle becomes a $125 bottle before it has reached the market. 

Now let’s imagine in this hypothetical scenario that the importer typically sells the $100 bottle for $150. Due to the proposed 25% tariff on imported liquor, the cost increases to $125. At an increased cost, it’s unlikely that the retail price will remain at $150, instead increasing proportionately to the rising cost of goods. So the retail price increases for the end customer. In other words, what used to be a $150 bottle at the liquor store is now $175 or more, and the consumer ends up paying for it at both ends.

What’s been the response to the proposed tariffs?

The new administration’s proposed tariffs on Canadian and Mexican goods were immediately met with counters in the form of same-value tariffs (25%) on U.S. whiskey and liquor products. 

Counter tariffs are expected to cause considerable disruptions in the supply chains of spirits companies. Many producers are likely to implement cost-cutting measures to mitigate the financial impact, however, these strategies may only offer temporary relief and increased costs are likely to be passed on to consumers in the form of higher retail prices. “Well, I’m a bourbon drinker and don’t buy Canadian Whisky anyway!” This is a fair point, but for local businesses selling Canadian whisky or Tequila, costs will increase and end-consumers will end up fronting the bill. “So we should just buy local bourbon whiskey and liquor?” You should buy local, but let’s not forget the huge impact that counter-tariffs from Canada and Mexico could have on the U.S. whiskey industry.

Whiskey is one of the largest exported goods in the U.S., and counter-tariffs could significantly impact the local whiskey economy. If whiskey exportation becomes more costly, then local prices aren’t immune to increased prices. This is of course speculative what with the current pause in place, but given the whiskey industry saw a 5.5% decline in 2024, another barrier to growth in the form of counter-tariffs will certainly result in a retail response.

What will the tariffs mean for U.S. whiskey and whiskey makers?

As we’ve touched on above, retaliatory tariffs and the increased costs of exporting bourbon and American whiskey from the U.S. will lead to a complex web of economic consequences that could disrupt the global spirits market. Supply chains are under threat, and with the financial implications of greater export costs, distillers and producers looking to recoup lost revenue from the cost of exportation could be forced to increase local prices as a means of regaining lost revenue. This means buying local whiskey becomes more expensive as a result of these initial taxes on imported liquor.

The Governor of Kentucky made a statement on February 4th 2025 that “harmful tariffs are putting our bourbon industry in danger”, suggesting Trump’s authorization of tariffs in Canada and Mexico has “led to retaliatory actions on Kentucky bourbon that will be costly, disruptive and harmful”, urging Kentucky’s congressional delegation to support the industry and intervene.

Similarly, the United States Distilled Spirits Council’s statement on February 1st 2025 requests a dialogue to address the potential tariffs on distilled spirits and calls for their prevention. The Council’s statement that “U.S. tariffs on imported spirits from Canada and Mexico will significantly harm all three countries and lead to a cycle of retaliatory tariffs that negatively impacts our shared industry”, a bleak insight into the potential fallout of introducing tariffs. 

Will tariffs affect liquor from outside Canada and Mexico?

The authorization of liquor tariffs has thus far only triggered retaliatory measures from Canada and Mexico (excluding China), further complicating international trade dynamics. It’s a similar move to the one sanctioned in 2019 during Trump’s previous term, where he introduced scotch whisky tariffs amidst a trade dispute with the EU. It’s estimated that the scotch whisky industry took a £600 million hit during this time, with the U.S. being Scotland’s primary whisky export market.

For scotch drinkers, the tariffs imposed on Canada and Mexico are a warning sign (so stocking up now is a consideration). If a blanket 25% tariff is reintroduced and imposed on scotch whisky imports then your favorite scotch is set to become significantly more expensive. With that being said, given the UK is no longer part of the EU, it remains to be seen what sort of fallout could potentially be had on this sector of the liquor industry.

Major beverage companies are bracing for the impact of these tariffs with Diageo (Johnnie Walker, Don Julio etc.) pre-emptively withdrawing its medium-term growth targets due to the uncertainty around tariff-related fallout. According to the Financial Times, the company has estimated a potential $200 million annual profit reduction if the tariffs remain in place. Uncertain times indeed.

With so much early opposition and pushback from within the industry, it’s hard to gauge whether these tariffs will meaningfully come into effect. A 30-day pause has already been ratified, meaning we won’t have the full picture for at least another month. One thing is certain, however, if these tariffs do come into effect, the bourbon and whiskey industry globally will look quite different to the one we see today. Let’s just hope it’s not you and I footing the bill…