T is for Tariffs: What and Why?

TARIFF – /ˈtarɪf/ noun –

a tax or duty to be paid on a particular class of imports or exports

Famously coined by US President Donald Trump as the “most beautiful word in the dictionary” during his 2024 presidential campaign, historically might have sound dry, bureaucratic, or even foreign to most. However, recently for the spirits industry et al, tariffs had a very real impact on pricing, availability, and business strategy. Over the past few years, we’ve seen how trade wars and retaliatory tariffs have reshaped the global drinks market. Now, in 2025, the topic is back in the spotlight as potential new U.S. tariffs on European and Mexican imports—along with China’s retaliatory duties on EU spirits— could once again disrupt the industry.

For brand owners (like us at Mack Brands), importers, distributors, and ultimately, consumers, these changes raise big questions.

·       Will certain spirits become more expensive? And which ones?

·       How will businesses absorb or pass on these costs?

·       Are we heading toward another round of trade disruptions like we saw in the late 2010s?

While we can’t control government policies, we can prepare by understanding the real impact of tariffs and what they mean for the future of the spirits market and the cost of your favourite cocktail.

How Do Tariffs Work?

At its core, a tariff is a tax on imported goods - imposed by a government on products entering its borders. The purpose varies— sometimes it’s to protect local industries, sometimes it’s about raising government revenue, and other times, it’s a form of economic retaliation (ie.“cold warfare” according to some).

Let’s break it down with a simple example. Say a bottle of whiskey is produced in Canada and exported to the U.S. The base price (before any taxes) is $20. In a tariff-free world, normal import duties, excise taxes, and sales taxes apply. However, a new 25% tariff on Canadian whiskey would mean an extra $5 per bottle (calculated on base price). That cost doesn’t just disappear—it gets passed down the supply chain, increasing wholesale costs and ultimately consumer facing retail prices.

For businesses, tariffs aren’t just a price increase— they disrupt supply chains, shift consumer demand, and force companies to rethink pricing strategies.

To make this more tangible, let’s explore how tariffs affect the final price of an imported bottle.

Illustrative example: Canadian Whiskey Imported to the U.S. (Before and After Tariffs)

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What Happened Last Time?

Tariffs are not a new phenomenon or just a concept we rote learned in Economics 101. Looking back at previous trade wars where tariffs were the weapon of choice, we can see the real impact that tariffs had on the spirits industry.

Between 2018 and 2022, the U.S. imposed a 25% tariff on Scotch whisky and European brandies in response to an unrelated dispute over aircraft subsidies (remember Airbus/Boeing). The result?

• U.S. imports of Scotch whisky fell by 37%, with smaller distilleries struggling to absorb the costs.
• European spirits brands lost significant market share in the U.S., leading to job losses and reduced production.
• The EU retaliated with tariffs on American whiskey, causing a decline in U.S. whiskey exports to Europe.
• Prices for premium spirits jumped globally, as businesses were forced to pass on costs to consumers.

This was offset by the dynamics of soaring demand during Covid, hence many of us where oblivious and distracted by its impact.

Now, with a fresh round of tariff threats, we could see similar disruptions across multiple markets in 2025. This time around, we don’t have the unprecedented demand levels from a low-inflationary Covid-19 period that offset this impact.

What’s Happening in 2025? The New Tariff Landscape

The current tariff threats we’re facing have multiple layers, impacting different regions and spirit categories in various ways. And it’s not only Trump wielding his wand:

• U.S. Tariffs on Mexican and Canadian Imports: In February 2025, President Donald Trump announced plans to impose a 25% tariff on all imports from Mexico and Canada, including spirits such     as tequila and Canadian whisky. These tariffs were initially set to take effect on February 4, 2025. However, after negotiations, the implementation was paused for 30 days to allow further discussions. The European Union (EU) was not directly targeted by these specific tariffs. However, President Trump has expressed intentions to implement "reciprocal" tariffs on countries that impose tariffs on US goods.
• China’s Retaliatory Tariffs on European Spirits: In response to EU tariffs on Chinese electric vehicles, China has imposed duties on European brandies, particularly Cognac and Armagnac,     making them significantly more expensive in one of their biggest export markets. Sales of Cognac in China already fell 25% in 2024, and with these tariffs, that trend could continue, potentially shifting demand toward other categories like whiskey.

• The Long-Term Impact of Brexit and EU-UK Trade Tensions: While Brexit-related tariffs have stabilised somewhat, UK-EU trade negotiations continue to impact alcohol imports and pricing structures.

Risks and Opportunities: Where Do We Go From Here?

While tariffs present serious challenges, they also create new opportunities for those who can adapt strategically. The immediate and long-term risk factors include:

Higher Prices, Lower Demand – Increased import costs could force pricehikes, pushing consumers toward cheaper alternatives or domestic brands.

Pressure on Bars & Restaurants – Already struggling with tight margins, venues may cut premium spirits from menus, favouring local options.

Stock Disruptions & Supply Chain Issues –Importers may hold off on shipments or panic-buy, causing bottlenecks and uneven supply.

Retaliation & Trade Wars – Potential counter-tariffs from the EU or China could hurt whiskey exports and disrupt global trade.

Shifting Consumer Behaviour – Rising costs may lead to downtrading, favouring RTDs or locally made spirits.

The opportunities that arise from a tariff imposed environment requires agility and clever, specific strategic thinking:

Irish Whiskey’s Growth – U. S. Tariffs on Canadian Whiskey can open marketspace for Irish Whiskey since they are similar in style and China’s Tariffs on Cognac could push consumers toward Irish Whiskey. Growth is further fueled by Irish Whiskey’s shift in perception to being more premium.

Premiumization Still Holds – High-end consumers prioritize quality over price, making strong branding key to maintaining demand.

Diversifying Markets – Expanding in Europe and Asia can offset U.S. losses, with strong whiskey demand in China, India and Japan including European hotspots e.g. France and Poland. Notwithstanding its challenges, emerging markets like Nigeria become lucrative too.

On-Trade Adaptation – Bars and restaurants can adjust with creative menu placements, whiskey flights, and premium storytelling to justify price increases.

Optimizing Supply Chains – While relocating production isn’t an option, cost-saving strategies like co-shipping and warehouse optimization can help.

What Can Brand Owners Control?

At Mack Brands, we can’t control global tariffs, but we can control how we navigate them:

• Strategic pricing & market positioning – Continue to find ways to remain competitive in key markets while ensuring our brand equity stay strong and grows.
• Long-term stability –  While tariffs may come and go, our commitment to quality and craftsmanship remains unchanged.
• Keeping our partners informed - making sure distributors and importers understand the latest developments and possible cost implications. Everyone is in the same boat.
• Cost discipline – Working with suppliers to manage future production levels and negotiate prices that increase gross margins and protect importers from price increases.
• Strategic pricing & market positioning – Continue to find ways to remain competitive in key markets while ensuring our brand equity stay strong and grows. Exploring creative pricing and promotions with distributors - to ensure that higher costs don’t always translate to lost sales.

Final Thoughts: Should the Industry Be Worried?

Yes and no.

• Yes, because tariffs will inevitably raise costs, disrupt supply chains, and pressure profit margins. If further retaliatory tariffs emerge, we could see a repeat of the 2018-2020 trade war that hit both sides of the Atlantic hard. Disposable income is under pressure; inflationary tariffs and somegovernments threatening tax increases is concerning.
• No, because businesses that plan ahead, diversify markets, and adapt their strategies will find ways to mitigate the damage. The spirits industry is resilient and continues to navigate challenges otherwise deemed as insurmountable. Tariffs are a threat but there are other regulatory issues that could prove more challenging in the long-run for the industry as a whole.

The reality is we are living in a world where uncertainty and chaos are a constant. No one can predict what the outcome will be of tariffs or what unprecedented decisions need to be made to stay ahead of the curve. The onus is on us as businesses and brand owners to remain disciplined, true to our selves and continue to deliver unmatched quality.  

Think about your favourite drinks brands (even cars, jewellery, handbags, furniture etc); Are their stories, what they stand for and quality enough to stand the tariff test. Or are you trading down?

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