Key Takeaways

Reframing Tariffs – A Strategic Tool for Domestic Strength: President-elect Donald Trump views tariffs as more than just a diplomatic tool for leveraging trade negotiations. Unlike previous presidents, who often framed tariffs as a way to address specific trade imbalances or maintain global trade relationships, Trump sees them as a strategic mechanism to strengthen the domestic economy. His approach underscores the belief that tariffs can protect American industries, secure domestic jobs, and promote economic independence, thereby making America stronger from within. This perspective marks a departure from traditional policy, prioritizing internal economic growth over broader global trade considerations. 

What Sets the Wine & Spirits Industry Apart: The impact of tariffs on wine and spirits will be felt almost entirely by US businesses and employees. Importers, distributors, and retailers are based here in America with American employees. Any impact of tariffs will be felt by those American businesses. Also, imported, single-origin wine and spirits—such as Scotch Whisky, Champagne, and Tequila—are irreplaceable in the U.S. marketplace due to their unique production requirements and geographical origins. Unlike other industries, these products have no domestic alternatives. WSWA’s advocacy efforts focus on educating the incoming administration about the distinctive role these imports play in supporting the U.S. economy. Tariffs on these items could disrupt the market, leading to significant losses in American jobs, tax revenue, and overall economic output. 

The Current U.S. Wine & Spirits Marketplace: According to SipSource data (October 2024), in the last year U.S. wine and spirits experienced a -5.2% decline in volume and -4.5% decline in revenue. Imported wine and spirits make up 30-35% of the U.S. marketplace and imported wine has declined -5.2% in volume in 12-month rolling data ending October 2024. 

Examining the Economic Impact of Blanket Tariffs on Imported Wine & Spirits: A recent economic study conducted by John Dunham and Associates examines the far-reaching consequences of blanket tariffs ranging from 10% to 30% on all imported wine and spirits. The findings reveal how such measures could amplify economic strain, impacting not just wholesalers and retailers but also consumers and the broader hospitality industry. This analysis serves as a critical tool in advocating for more nuanced trade policies that consider the unique dynamics of the wine and spirits sector.

Taking a Closer Look at Tequila: Tequila, a unique, single origin imported product facing a proposed 25% tariff under the new administration, is one of the only drivers of growth in the U.S. spirits marketplace and makes up 13% of all spirits sold by volume in the United States, according to WSWA’s SipSource (October 2024). A newly released economic study from John Dunham and Associates explores the impact of the currently proposed 25% tariff on Mexican wine and spirits. 

From a Wholesaler Perspective: Wholesalers are navigating an increasingly challenging market. In 2024, two wholesalers in Washington State shut down operations, while a third was acquired by a competitor, signaling significant market pressures. In the short term, distributors are prioritizing inventory management, balancing their ability to stock products against the physical space available in their facilities. However, in the long term, inevitable price increases will cascade down the supply chain, ultimately impacting consumers. 

Diversification is Key: To reduce the impact of tariffs, diversification within product portfolios is essential for importers. A strong, varied portfolio provides resilience in the face of economic disruptions. Industry expert Theo Koebel recommends exploring emerging categories such as the no- and low-alcohol segment, which is experiencing rapid growth. Additionally, small to medium-sized U.S. wineries seeking new market access present an opportunity for distributors to expand their offerings and drive future growth. 

Building a Strong International Coalition: The fight against tariffs on imported wine and spirits requires active engagement from foreign producers. Past signals from the administration suggest a willingness to collaborate with foreign governments that approach negotiations in good faith. Importers should leverage their relationships with producers to amplify their voices and encourage international advocacy groups and governments to join the conversation. A unified, global coalition is critical for protecting businesses on both sides of the supply chain. 

From the Retailer Perspective: Tariffs inevitably lead to higher prices, further straining consumers already grappling with inflation. According to November 2024 Consumer Price Index (CPI) data, the overall CPI rose +2.7% over the past 12 months, while food-related CPI—including beverage alcohol—increased +2.4%. The "food at home" index saw a +1.6% rise, and "food away from home" surged by +3.6%. These economic realities leave American consumers with tighter budgets, demanding more value for their money. Retailers, still burdened by excess inventory from the COVID-19 era, face cash flow concerns as they adapt to shifting consumer priorities and higher operating costs.