There’s a double whammy hitting the U.S. alcohol industry lately: Americans are drinking less, while foreigners have soured on our exported spirits amid higher tariffs. Those dynamics have worsened a crisis that’s already seen some distilleries go out of business this year and thousands of jobs eliminated.
Exports of U.S. spirits to Canada plunged by 85% in the second quarter from a year ago, marking the steepest declines among four key markets, according to data released Monday by the Distilled Spirits Council of the United States (DSCUS). Overall, exports of American spirits fell 9% in the second quarter as U.S. spirits makers pay the price of persistent trade tensions.
Particularly problematic for U.S. spirits makers is the double-digit decline in exports to each of four key markets that represent 70% of total exports by value: the European Union, Canada, the United Kingdom, and Japan.
After a record year for U.S. spirits exports in 2024, this steep slump in exports in the second quarter is “very troubling” for U.S. distillers,” Chris Swonger, president and CEO of the spirits council, said in a statement. “There’s a growing concern that our international consumers are increasingly opting for domestically produced spirits or imports from countries other than the U.S., signaling a shift away from our great American spirits brands.”
This data shows the extent of the effect of Canada’s retaliatory tariffs on U.S. spirits, along with the decision by liquor stores in many provinces to yank American brands from their shelves altogether.
While Canada did remove its retaliatory tariffs on U.S. spirits last month, drinkers there may have found other options that are more appealing to their palettes. In April, for example, sales of U.S. spirits plummeted 68%, though sales of Canadian and other imported spirits rose about 3.6% each, according to DSCUS.
TARIFFS RIPPLE THROUGH WHISKEY COUNTRY
The spirits industry has emerged as a perhaps unlikely victim of President Donald Trump’s aggressive tariff policy that he embarked on this spring. And that’s reverberating through the heart of America’s whiskey country, where the international market has become especially crucial especially as Americans have cut back on consumption. Tennessee led the country with spirits exports of $934 million in 2024, followed by Kentucky with $751 million, according to DSCUS.
The plummet in exports is only part of the problem for American whiskey distillers.
Through April of this year, whiskey distillers had produced 78 million proof gallons, a 28% decrease from the same period last year and the lowest level since 2019, according to figures from the Treasury Department’s 2025 monthly national statistics report and reporting by The Lexington Herald Leader. What’s more, American whiskey inventories have tripled since 2012, according to DSCUS, which means these distillers are sitting on a lot of product.
Combined, these factors have spelled trouble. Big conglomerates like Brown-Forman, which owns Jack Daniel’s and Woodford Reserve, have slashed jobs by double digits or, in the case of Diageo, halted production altogether at two of its whiskey distilleries in Tennessee and Texas. Kentucky Owl, which is owned by Stoli Group, filed for bankruptcy protection.
What’s more, brands that might not be household names—Uncle Nearest, Limestone Farms Distillery, Garrard County Distillery, and Luca Mariano—have also faced problems ranging from bankruptcy to shutting down production to lawsuits related to millions of dollars in debts.
AMERICANS ABSTAINING
Another factor upending the spirits industry is that Americans are laying off booze like never before. Only 54% of U.S. adults say they consume alcohol, according to an annual poll released in August, the lowest level since Gallup began tracking drinking habits in 1939. The decline has been especially steep recently: In 2022, 67% of Americans reported drinking alcohol.
Slowing demand for alcohol domestically means that it’s “critically important” that U.S. distillers have the certainty of zero-for-zero tariffs with key export markets, Swonger said.
The spirits council is urging President Trump to reconsider his tariff stance—something elected politicians from affected states haven’t been so universally vocal about.
TARIFFS AND POLITICS
While Kentucky’s top leaders—Democratic Governor Andy Beshear, along with Republican Senators Mitch McConnell and Rand Paul—came together in a rare act of bipartisanship in March to push back on Trump’s tariffs, the same hasn’t happened in Tennessee. Republican Governor Bill Lee backed Trump’s tariff policy in the spring and hasn’t been quoted on the impact to his state’s spirits industry more recently.
In a 25-year span, the U.S. has seen the number of distillers explode from about 60 to more than 3,100 today in what’s been an “amazing growth story,” Swonger tells Fast Company. And the industry thrives best with a zero-for-zero tariff policy—zero tariffs on imports, zero tariffs on exports—something the council is hopeful President Trump will be able to achieve once again with key trading partners, while furthering his goals to reduce the trade deficit.
That might seem counterintuitive because tariffs on imported spirits could theoretically provide U.S. distillers with a competitive advantage, Swonger says. But the current 15% tariff imposed on imports of all spirits from the European Union, for example, has a ripple effect on restaurants, retailers, distributors, bartenders, and consumers. “We want to compete for taste,” he adds.
The council is optimistic that Trump will successfully navigate trade talks to alleviate the uncertainty and lack of predictability currently facing the industry—including in a highly anticipated meeting between Trump and Canadian Prime Minister Mark Carney this week. Those talks might help ease the iciness that’s seen many state-owned liquor stores in various Canadian provinces continue to abstain from carrying American spirits altogether.
“That’s unfortunate,” Swonger says of the current dynamic. “The emotions in Canada are high, and we hope the prime minister and president have a good meeting.”
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