US Tariff Impact on the BC Wine Industry
Canada today announced a 25% tariff on wine and other alcohol alcoholic beverages produced in the U.S. This tariff is in retaliation for the U.S. 25% tariff on Canadian-produced goods which was imposed today.
The Canadian tariff applies to all wines produced in the U.S. and imported into Canada. Because the 25% tariff is imposed at the point of entry, before the (Liquor Distribution Branch) LDB markups and other taxes, the total impact after the ‘tax-on-tax’ multiplier effect will be more like a 35% to 40% increase in the price of wines from California and other U.S. wine growing regions. These price increases are likely to be delayed until importers and distributors exhaust inventories already in Canada and order new supplies from the United States.
Arrowleaf Cellars, Lake Country BC (Photo by Megan O’Neill)
Also today, BC Premier Eby announced that the LDB will be immediately pulling all American liquor from Republican ‘red states’ (such as Kentucky, Texas, and Florida), and will not be buying any more.
The LDB will continue to sell through its existing wine inventory in both its retail and wholesale channels, but will not replenish stocks of wines or other liquors from ‘red states’ when their inventories are exhausted. For ‘blue states’ like California, Oregon, and Washington, the LDB will continue to stock and restock these wines and make them available to private (Licensee Retails Store) LRS stores.
Canada’s retaliatory tariff will give BC wine a significant price advantage over US wines, but because the BC Premier chose to ban only wine from ‘red’ states (are there even any ‘red’ states selling wine into Canada?), there will be a little free up of shelf space at the LDB or in private liquor stores. In Ontario and Nova Scotia, respectively, Premier Doug Ford and Premier Tim Houston have freed up more shelf space by directing removal of all US alcohol from provincially run liquor stores. As a result, Canadian producers, including BC wineries, should have enhanced access to shelving space.
Canada is the US’s biggest customer for export wines, purchasing US$1.1 billion of US wines, mainly from ‘blue states’ such as California. With the impending decline in US wines and liquors being available in BC at competitive prices (or at all), BC producers should see this as an opportunity to increase their relative market position.
The US imposition of tariffs on Canada has raised nationalistic sentiments and ‘buy Canada’ campaigns, and has increased pressures to remove interprovincial trade barriers to the free shipment of wines across Canada. Unfortunately, Alberta has just announced an increase of the administrative fee on Direct-to-Consumer (DTC) shipments from $3.08 to $4.11 per litre. This might dampen DTC sales by BC wineries into Alberta, though it helps that imposition of the tariff will increase the price of US wines by considerably more. Premier Ford has announced that Ontario will be removing its restrictions on DTC shipments into the province, but has not yet made clear whether its regular 79% markup, or some lower rate, will apply to such shipments. If it’s normal markups will apply, then the change will have little to no impact on the access of BC wines to the Ontario market.
It remains to be seen whether the impacts of the higher prices for US wines, together with ‘buy Canadian’ sentiments, both of which should increase the demand for BC wine, will be offset by the dampening impact of the tariffs on macroeconomic indicators and reduce wine purchases. It may help tourism in the Okanagan this summer as more Canadians choose to vacation at home. Analysts are predicting a 2.5% decline in Canada's GDP by early 2026, an increase in the inflation rate to 7.2% by mid-2025, and a rise in unemployment to 7.9% by the end of 2025 as a result of the tariff war.
Megan O’Neill is a Senior Associate at FARRIS LLP