There’s a double whammy hitting the U.S. alcohol industry these days: Individuals are ingesting much less, whereas foreigners have soured on our exported spirits amid greater tariffs. These dynamics have worsened a disaster that’s already seen some distilleries exit of enterprise this yr and 1000’s of jobs eradicated.
Exports of U.S. spirits to Canada plunged by 85% within the second quarter from a yr in the past, marking the steepest declines amongst 4 key markets, based on data released Monday by the Distilled Spirits Council of america (DSCUS). Total, exports of American spirits fell 9% within the second quarter as U.S. spirits makers pay the worth of persistent commerce tensions.
Notably problematic for U.S. spirits makers is the double-digit decline in exports to every of 4 key markets that characterize 70% of complete exports by worth: the European Union, Canada, the United Kingdom, and Japan.
After a report yr for U.S. spirits exports in 2024, this steep hunch in exports within the second quarter is “very troubling” for U.S. distillers,” Chris Swonger, president and CEO of the spirits council, mentioned in a statement. “There’s a rising concern that our worldwide shoppers are more and more choosing domestically produced spirits or imports from nations aside from the U.S., signaling a shift away from our nice American spirits manufacturers.”
This information exhibits the extent of the impact of Canada’s retaliatory tariffs on U.S. spirits, together with the choice by liquor shops in lots of provinces to yank American manufacturers from their cabinets altogether.
Whereas Canada did remove its retaliatory tariffs on U.S. spirits final month, drinkers there could have discovered different choices which might be extra interesting to their palettes. In April, for instance, gross sales of U.S. spirits plummeted 68%, although gross sales of Canadian and different imported spirits rose about 3.6% every, based on DSCUS.
TARIFFS RIPPLE THROUGH WHISKEY COUNTRY
The spirits business has emerged as a maybe unlikely sufferer of President Donald Trump’s aggressive tariff coverage that he launched into this spring. And that’s reverberating by way of the center of America’s whiskey nation, the place the worldwide market has develop into particularly essential particularly as Individuals have in the reduction of on consumption. Tennessee led the nation with spirits exports of $934 million in 2024, adopted by Kentucky with $751 million, based on DSCUS.
The plummet in exports is simply a part of the issue for American whiskey distillers.
Via April of this yr, whiskey distillers had produced 78 million proof gallons, a 28% lower from the identical interval final yr and the bottom degree since 2019, based on figures from the Treasury Division’s 2025 month-to-month nationwide statistics report and reporting by The Lexington Herald Leader. What’s extra, American whiskey inventories have tripled since 2012, based on DSCUS, which suggests these distillers are sitting on quite a lot of product.
Mixed, these components have spelled hassle. Large conglomerates like Brown-Forman, which owns Jack Daniel’s and Woodford Reserve, have slashed jobs by double digits or, within the case of Diageo, halted manufacturing altogether at two of its whiskey distilleries in Tennessee and Texas. Kentucky Owl, which is owned by Stoli Group, filed for chapter safety.
What’s extra, manufacturers that may not be family names—Uncle Nearest, Limestone Farms Distillery, Garrard County Distillery, and Luca Mariano—have additionally confronted issues starting from bankruptcy to shutting down manufacturing to lawsuits associated to tens of millions of {dollars} in money owed.
AMERICANS ABSTAINING
One other issue upending the spirits business is that Individuals are shedding booze like by no means earlier than. Solely 54% of U.S. adults say they devour alcohol, based on an annual poll launched in August, the bottom degree since Gallup started monitoring ingesting habits in 1939. The decline has been particularly steep not too long ago: In 2022, 67% of Individuals reported ingesting alcohol.
Slowing demand for alcohol domestically implies that it’s “critically necessary” that U.S. distillers have the knowledge of zero-for-zero tariffs with key export markets, Swonger mentioned.
The spirits council is urging President Trump to rethink his tariff stance—one thing elected politicians from affected states haven’t been so universally vocal about.
TARIFFS AND POLITICS
Whereas Kentucky’s high leaders—Democratic Governor Andy Beshear, together with Republican Senators Mitch McConnell and Rand Paul—got here collectively in a rare act of bipartisanship in March to push again on Trump’s tariffs, the identical hasn’t occurred in Tennessee. Republican Governor Invoice Lee backed Trump’s tariff policy within the spring and hasn’t been quoted on the impression to his state’s spirits business extra not too long ago.
In a 25-year span, the U.S. has seen the variety of distillers explode from about 60 to greater than 3,100 at the moment in what’s been an “superb development story,” Swonger tells Quick Firm. And the business thrives finest with a zero-for-zero tariff coverage—zero tariffs on imports, zero tariffs on exports—one thing the council is hopeful President Trump will be capable of obtain as soon as once more with key buying and selling companions, whereas furthering his objectives to cut back the commerce deficit.
That may appear counterintuitive as a result of tariffs on imported spirits may theoretically present U.S. distillers with a aggressive benefit, Swonger says. However the present 15% tariff imposed on imports of all spirits from the European Union, for instance, has a ripple impact on eating places, retailers, distributors, bartenders, and shoppers. “We need to compete for style,” he provides.
The council is optimistic that Trump will efficiently navigate commerce talks to alleviate the uncertainty and lack of predictability at the moment going through the business—together with in a extremely anticipated assembly between Trump and Canadian Prime Minister Mark Carney this week. These talks may assist ease the iciness that’s seen many state-owned liquor shops in numerous Canadian provinces proceed to abstain from carrying American spirits altogether.
“That’s unlucky,” Swonger says of the present dynamic. “The feelings in Canada are excessive, and we hope the prime minister and president have an excellent assembly.”
