How new tariffs impact the beverage alcohol industry

Alcohol duties and taxes are changing frequently. This is what we know as of May 20, 2025:

• The U.S. imposed 25% tariffs on many Canadian and Mexican imports on March 4; products that qualify for preferential treatment under the United States-Mexico-Canada Agreement (USMCA), which includes most wine, beer, and spirits, are not subject to the additional tariffs effective March 7.
• Canada imposed 25% tariffs on U.S. beer, spirits, and wine starting March 13
• Mexico said it would impose retaliatory tariffs on U.S. goods but has yet to do so
• The U.S. imposed additional 10% tariffs on Chinese imports, including alcoholic beverages, as of February 4; it increased the tariffs to 20% on March 4; products of China and Hong Kong are also subject to so-called reciprocal tariffs (125% April 10 through May 13; 10% as of May 14, for an initial period of 90 days)).
• The EU said it would impose a 50% tariff on U.S. bourbon and whiskey starting April 1, but decided against it. The EU then voted to phase in 10%–25% tariffs on a host of products — but not alcoholic beverages. Those tariffs are on hold until mid-July.
• The U.S. threatened but hasn’t implemented a 200% tariff on all alcoholic beverages from the EU.
• A new 10% tariff applies to products from all countries (except China) as of April 5.

Here are more details.

There have been numerous tariff-change announcements, implementations, and delays since President Trump took office. On February 1, 2025, he said there would be new tariffs on Canada, Mexico, and China starting February 4. At the last minute, the tariffs on Canada and Mexico were delayed, but most of the China tariffs took effect. New U.S. tariffs on steel and aluminum were implemented on March 12.

New U.S. tariffs on steel and aluminum were implemented on March 12. Per Federal Register guidance, the additional duties on aluminum derivatives apply to beer and empty aluminum cans entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. ET on April 4, 2025. 

Tariffs on Canadian and Mexican imports took effect on March 4. A few days later, goods eligible for duty-free status under USMCA — including most beer, wine, and spirits — were exempted from the new tariffs. So, while the cans containing beer and other beverages are subject to the tariffs, the contents of the can may not be.

Canada responded to the March 4 tariffs with 25% retaliatory tariffs on many U.S. goods starting March 4. Beer, wine, and spirits are now subject to new Canada alcohol tariffs. (Learn more about the U.S.-Canada trade war.)

Mexico said it would implement retaliatory tariffs but has yet to do so.

On March 11, the European Commission said it would respond to new U.S. tariffs on steel and aluminum by reestablishing tariffs that had been adopted then suspended during the first Trump administration. The first round of tariffs would come into effect on April 1; additional tariffs would take effect on April 13. 

The April 1 tariffs included 50% EU alcohol tariffs on U.S. bourbon and whiskey.

President Trump hit back on March 13 with a threat to put a 200% tariff on all wine, beer, and spirits imported from the European Union unless the EU immediately removed the promised new tariffs.

On March 19, the European Commission said it would delay the first round of retaliatory tariffs to allow time for “negotiations to try to find a mutually agreeable resolution.” In mid-April, the EU approved new tariffs on a variety of U.S. products but then suspended those tariffs until mid - July.

Trump announced more tariffs on more products and countries on April 2, 2025. He initially placed high tariffs on dozens of countries, then suspended those and opted for a baseline 10% on virtually all imports, including beverage alcohol. 

China was subject to much higher rates, though these were suspended for 90 days as of May 14, while products that qualify for preferential treatment under the USMCA remain duty-free.

Read more about the on-again, off-again tariffs.

Alcohol import tariffs could significantly reduce cross-border sales of high-tariff beer, wine, and spirits.

Sales dropped after 25% U.S. alcohol tariffs were imposed on some European wines in 2019: imports of French wine fell by 54% in response to tariffs on French wine. Imports of German wine fell by 42% due to the increased U.S. alcohol import taxes.

The U.S. is the largest export market for European wine, so decreasing sales in the U.S. doesn’t go unnoticed. About 72% of U.S. wine imports come from the EU. Put another way, Europe sends more than €4.5 billion worth of wine to the U.S. every year.

On the flip side, the EU is the largest market for exports of U.S. whiskey. In 2021, following tariffs temporarily implemented during President Trump’s first term, U.S. whiskey sales to the EU dropped 20%.

Closer to home, Canada is the biggest importer of U.S. wine and the second largest market for U.S. spirits exports. At least, it was before Canadian liquor stores pulled American brands off the shelves and canceled outstanding orders in response to the U.S. tariffs. Americans like Canadian alcohol, too: The United States imported $1.62 billion of Canadian beverages, spirits, and vinegar in 2024.

The U.S. imported even more Mexican beer, wine, sprits, and vinegar in 2024 — $13.14 billion worth. Though most beer consumed in the U.S. is produced domestically, about 81% of U.S. beer imports came from Mexico in 2023; tequila imports jumped from $350 million to $5.4 billion between 2000 and 2024.

The market for Chinese beer, wine, spirits, and vinegar is smaller but still noteworthy, at $99.28 million in 2024. Imports declined in the wake of the 2018-2019 tariff hikes and dropped sharply in 2020 due to the COVID-19 pandemic, but they increased considerably in 2023 and 2024.

“Increased material costs will burden domestic wineries already hurting with inflation and declining wine sales,” says Shannon Fahey, Indirect Tax Researcher at Avalara.

And tariffs aren’t the only challenge for wine producers: Fahey says the industry is also seeing a decrease in domestic demand. “Younger generations are looking to other products such as hard seltzers, ready-to-drink (RTD) cocktails, and even simply more affordable wine brands, or are not consuming alcohol at all. These factors, along with others like climate change and inflation, may force the industry to innovate and get creative, not only with materials, marketing, and pricing, but with producing the wine itself.”  

The increased tariffs on steel and aluminum imports will likely increase costs of barrels, equipment, and cans. Higher tariffs on certain ingredients and materials could also increase the cost of inputs for producers. Fahey says that for spirits, specifically tequila and mezcal, many materials and ingredients come from Mexico.

It’s hard to know which tariffs will take effect until they do, and there’s no way of knowing how long new tariffs will last. Nevertheless, businesses need to be ready to comply with new tariffs when and if they arise.

With tariff changes happening frequently and at the last minute, the most effective way for businesses to manage alcohol tax compliance is to automate the collection and remittance of customs duties and import taxes.

Avalara Cross-Border can help.

“Our talented team of researchers and engineers work around the clock to ensure the vast array of trade content we deliver to our customers is both timely and accurate,” says Craig Reed, GM of Cross-Border at Avalara. “Despite the dizzying pace of change recently, our team has been on top of it. Whether it’s restrictions content, tariffs, classification codes, or other trade content, we provide our customers with the tools and services they need to be in compliance, all powered by our powerful AI and automation engines.”

Contact us today to learn how we can help you stay ahead of tariff changes.