Retailers Monitoring Tariffs’ Effects On Imported Spirits

Although a United States Court of Appeals for the Federal Circuit ruled many of President Trump’s tariffs are unconstitutional, they remain in place while the case is appealed to the U.S. Supreme Court. Beverage alcohol retailers and consumers have yet to feel the full impact of spirits tariffs, primarily 15% on E.U. imports and 10% on U.K. imports.

“A lot of our importers and distributors have been holding pricing at the expense of their margins,” says Marty Holland, manager of The Party Source in Bellevue, Kentucky. “We appreciate our partners giving us an opportunity to buy more before tariffs take effect in earnest. If the tariffs take hold, sales of international products will go down significantly.

“Tariffs impact the supply chain, especially when it comes to single malt Scotches,” Holland continues. “Due to the lack of consistent availability of these higher-end offerings, we can go out of stock of The Macallan ($93 for a 750-ml. of Sherry Oak 12-Year-Old to $3,200 for Double Cask 30-Year-Old) for weeks. This happened the last time we had tariffs. It created supply issues. There were giant holes on our shelves. We are working with our distribution partners to do some direct importing.”

Tariffs can also negatively affect domestic spirits producers who export. “There are concerns that if the U.S. is applying a 15% tariff, the E.U. will in six months apply a tariff back,” says Chris Swonger, CEO and president of the Distilled Spirits Council (DISCUS). “When a 25% tariff was applied on American whiskey by the E.U. in 2018, we lost 20% in exports. When the 25% tariff by the E.U. was removed, American whiskey exports surpassed the level before the tariffs were applied.”

Swonger believes that a fair and reciprocal trade environment is necessary for a healthy industry. “American consumers love Cognac, imported cordials and liqueurs, Scotch, and Irish whiskey,” he says. “A tariff will impact consumers, bartenders, distributors, and our retailer partners throughout the chain and create an accumulation trickle effect for the hospitality industry. We are working very hard to get us back to zero for zero tariffs. That’s good for the American distilled spirits and hospitality industries.”

David Tabibian, owner of Royal Wine and Spirits in San Jose, California, notes challenges this year also include price increases across all segments and an uncertain economy. “I’m sure tariffs are not going to help,” he says. “I’ve already increased retail prices, and we are not having the best economic situation right now.” While spirits sales are down slightly at Royal, Tabibian says they’re holding up relatively well, especially for whiskies and Tequila, even as Bourbon has lost some momentum.

And he remains optimistic about the long-term future of imported spirits. “It’s hard to say what impact the tariffs will have, but imported spirits aren’t going to die,” he says. “It’s part of the culture. You have these moments when you hit a little slow motion, and then it goes and picks right back up.”

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