The U.S. spirits sector has responded cautiously to Canada’s recent decision to eliminate tariffs on American alcohol imports, a move that could help ease tensions in the cross-border trade of distilled spirits.
On Friday, Canadian Prime Minister Mark Carney announced that Canada will remove the 25% tariff on U.S. products covered by the Canada–United States–Mexico Agreement (CUSMA). The measure takes effect Monday, September 1, and will once again allow American-made spirits to enter the Canadian market tariff-free.
A Trade Dispute That Shook the Market
The tariff was originally imposed in March, after Washington levied new taxes on Canadian goods. In retaliation, Canada targeted U.S. spirits, and several provinces went further by removing American alcohol from their liquor store shelves.
- Alberta and Saskatchewan reopened sales of U.S. products in June.
- Ontario, Canada’s most populous province, has so far kept American spirits off shelves through the Liquor Control Board of Ontario (LCBO).
The restriction had an immediate impact. According to Spirits Canada, sales of American spirits in Canada dropped by more than 66% between March and April, while overall spirits sales in the country fell 12% during that same period.
Industry Reactions
Chris Swonger, president and CEO of the Distilled Spirits Council of the United States (DISCUS), described Canada’s decision as “a very positive sign.” However, he cautioned that the benefits will remain limited until all provinces reinstate American products in their retail channels.
Swonger emphasized that the recall of U.S. spirits has:
- Hurt American distillers by cutting off a key export market.
- Reduced provincial revenue from liquor sales.
- Limited consumer choice and strained hospitality businesses in Canada.
Echoing these concerns, Cal Bricker, president and CEO of Spirits Canada, underlined the deep integration of the North American industry. He warned that the continued absence of U.S. products creates challenges for both Canadian and American producers, given their intertwined supply chains and market relationships.
Uncertainty in Ontario
The Liquor Control Board of Ontario (LCBO), which controls alcohol retailing in Ontario, has yet to confirm whether it will resume sales of U.S. spirits. Ontario’s position is crucial, as it represents a large share of Canada’s overall liquor sales. Until a decision is made, producers and distributors on both sides of the border face continued uncertainty.
Outlook
For U.S. distillers, the elimination of tariffs is a step forward, but full recovery depends on provincial decisions—especially Ontario’s. Industry leaders argue that the recall not only distorts trade but also undermines consumer choice and revenues in Canada.
As trade relations stabilize under CUSMA, the spirits industry is hopeful that provincial authorities will move quickly to normalize the flow of products and restore balance in a sector vital to both economies.
Source: Vinetur