Canadian distilleries are expected to face the steepest challenges if the United States follows through on a plan to ban most Canadian alcohol imports later this month, industry experts say.
The proposed measure comes as trade tensions between Canada and the U.S. continue to escalate. The restrictions would affect a wide range of Canadian alcohol products beginning Sept. 29, following Canada's decision earlier this week to impose retaliatory duties on American goods.
Distilleries heavily exposed to U.S. market
Craig Johnston, chief economist at Farm Credit Canada, told the Canadian Press distilleries are particularly vulnerable because they rely heavily on American customers.
According to Johnston, more than half of all spirits produced by Canadian distilleries are shipped to the United States.
He says producers that lose access to the U.S. market could have difficulty finding alternative buyers in Canada, Europe or elsewhere.
While Canadian whiskey and liqueur sold in containers larger than four litres would be exempt from the proposed ban, industry representatives say that carveout offers little relief.
Cal Bricker of trade association Spirits Canada says there are not many four-litre bottles that get sold anyway.
Bricker adds that shifting production to the United States is not a straightforward solution. Trade agreements governing products such as Canadian whisky limit where those products can be made, preventing distilleries from simply relocating production south of the border.
Brewers prepare for additional trade disruption
Canada's retaliatory duties this week prompted U.S. President Donald Trump to announce plans to prohibit most Canadian alcohol imports starting Sept. 29.
Andrew Oland, chief executive of Moosehead Breweries, said he wasn't surprised but still "very disappointed" to see alcohol further dragged into the latest trade escalation.
Oland said the Saint John, N.B.-based brewery ships about 15 per cent of its beverages to the U.S. market. Those products are already facing significant duties after trade talks between the two countries broke down last month.
The brewery is currently absorbing the cost of 50 per cent tariffs and focusing on shipping as much beer as possible over the next three weeks to preserve its shelf space and relationship with U.S. retailers.
Ontario wineries less dependent on exports
The outlook is less concerning for Canada's wine industry, which generally relies far less on U.S. sales.
Norman Beal, board chair of Ontario Craft Wineries, says only about one per cent of all wine sales come from customers in the United States.
Ontario Craft Wineries represents more than 110 wineries across the province.
"Canadian wine producers, we're relatively small," Beal said. "Most of our products are sold right here in Canada."
While wineries may feel some impact from the proposed restrictions, the industry's dependence on domestic consumers leaves it in a stronger position than distillers and some brewers if the U.S. ban takes effect later this month.
- with files from The Canadian Press
