Trump's hidden tariff toll on US wine and spirits

Since the re-election of Donald Trump, questions about tariffs and their impact on the American alcohol market have become a daily concern for importers, distributors, and consumers. The situation remains unclear after months of policy changes and uncertainty, but the effects of these tariffs are already exposing the underlying fragility of the U.S. market. This fragility is rooted in a complex regulatory structure that is often misunderstood, both inside and outside the country.

Alcohol regulation in the United States is far from the image of a free-market paradise. The 21st Amendment to the Constitution gives each state the authority to regulate alcohol independently, resulting in a patchwork of laws and tax structures across all 50 states. At the federal level, two main agencies oversee alcoholic beverages: the Food and Drug Administration (FDA) for products under 7% alcohol by volume (excluding most beers), and the Alcohol and Tobacco Tax and Trade Bureau (TTB) for stronger beverages. The TTB is responsible for issuing import and distribution licenses, approving labels and packaging, conducting quality controls, and collecting excise taxes. Both agencies also regulate domestic production.

Recent executive orders from President Trump have targeted these federal agencies with budget cuts and staff reductions. These changes have created additional challenges for companies seeking to introduce new products to the U.S. market. The introduction of new tariffs has only added to this confusion, making it even more difficult for importers to navigate regulatory requirements.

At the state level, regulations vary widely. Some states operate as “control” states, where government agencies manage distribution or retail sales of alcohol. Others are “open” states, where private companies can participate in distribution and sales after obtaining licenses. Most open states use a three-tier system that separates producers, distributors, and retailers to prevent monopolies. This system means that foreign producers cannot sell directly to American consumers; they must work through licensed importers and distributors, who then sell to retailers.

Each intermediary in this chain adds their own markup to the product’s price. When tariffs increase—such as the 10% hike imposed in April or the planned 30% tariff on European wines scheduled for August—the cost is paid by American importers when goods arrive at U.S. ports. These costs are then passed along through distributors and retailers before reaching consumers. As a result, prices rise across all segments of the market.

The impact of these tariffs is compounded by declining alcohol consumption in the United States. Higher prices have led to reduced purchases at every level of the market. Larger importers with strong financial reserves were able to stockpile inventory before tariffs took effect, but smaller businesses could not do so. With rising costs and inflation putting pressure on cash flow, many small and medium-sized importers, distributors, and retailers are struggling to survive. This has led to increased consolidation in the industry as larger players absorb smaller ones or force them out of business.

The ongoing changes are reducing both product variety and available inventory for American consumers. The devaluation of the dollar—a stated goal of President Trump—could further accelerate these trends by making imported goods even more expensive.

The combination of new tariffs, regulatory complexity, and economic pressures is reshaping the American alcohol market in ways that may be felt for years to come. Industry observers say that unless there is a significant change in policy or economic conditions, consumers should expect higher prices and fewer choices on store shelves across the country.