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Tariffs could cost $5bn and 100,000 jobs
The proposed 25% duty on Mexican and Canadian products, alongside other tariffs on wine and spirits, could result in US$5 billion in lost tax revenue.
The Wine & Spirits Wholesalers of America (WSWA) hosted a webinar, called Navigating Trade Challenges: Tariffs Impacts on Wine, Spirits & the US Economy, on 10 December.
In November, president-elect Donald Trump said he would issue an executive order to charge Mexico and Canada a 25% tariff on all products coming into the US when he takes office on 20 January. Trump believes that tariffs can protect American industries, secure domestic jobs, and promote economic independence.
Based on economic analysis by John Dunham and Associates cited by the WSWA, it found that the proposed 25% tariff on Mexican and Canadian products, coupled with broader blanket tariffs on all imported wine and spirits, could threaten nearly 100,000 American jobs.
The WSWA noted that these ‘proposed policies could drastically reshape the US beverage alcohol industry and its broader economic landscape’.
The trade association warned that single-origin products like Scotch whisky and Tequila are ‘irreplaceable’ in the US due to their unique production rules and geographical roots, and have no local alternatives.
It believes that tariffs on these items could ‘disrupt the market, leading to significant losses in American jobs, tax revenue, and overall economic output’.
Citing its SipSource tool, WSWA noted that the current wine and spirits market in the US is struggling to grow. For the 12 months ending October 2024, spirits reported a 3.3% volume drop and a 3.7% fall in revenue. For wine, the decline was steeper at 7.1% in volume and 5.8% in revenue.
A recent economic study by John Dunham and Associates predicts that a 10% tariff on imported wine and spirits could cause a loss of 12,000 jobs, going up to 60,000 if a 20% tariff was implemented, and 91,000 positions if a 30% duty was implemented.
A 20% tariff on wine and spirits could result in a tax revenue loss of US$2.9 billion, or US$4.9bn if a 30% tariff was set.
In terms of US economic output, the study estimates that a 20% tariff could lead to the loss of US$9.9bn, while a 30% tax is expected to have a US$14.9bn loss.
Impact of Tequila tariff
The study also looked at the impact of potential tariffs on Tequila, which was the only spirit category to grow in the last 12 months in the US and makes up 13% of all spirits sold by volume in the country.
“If Tequila were to face a 25% tariff, we would really be faced with a significant headwind on the only area that’s been a bright spot for wine and spirits wholesalers and retailers in the US,” said Dawson Hobbs, executive vice-president, government affairs, WSWA.
A 25% tariff on Mexican wines and spirits could mean the removal of 14,000 jobs, the study estimated. It could also cause a major loss of wages (US$744 million), tax revenue (US$1.3bn) and economic output (US$2.5bn).
The WSWA advised importers to diversify their portfolios to reduce the impact of any tariffs that come into force. Theo Koebel, executive vice-president of portfolio management at Winebow, recommended that companies look into emerging categories such as low-and-no.
The WSWA also highlighted the importance of companies coming together to fight against the tariffs. It noted that importers should ‘leverage their relationships with producers to amplify their voices and encourage international advocacy groups and governments to join the conversation’.
The trade body also warned that tariffs would ‘inevitably lead to higher prices’. According to Consumer Price Index (CPI) data from November 2024, the overall CPI rose by 2.7% over the past 12 months, while food-related CPI – including alcohol – increased by 2.4%.
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