The landscape of importing beverage alcohol is undergoing a seismic shift with new, aggressive tariff policies rolling out, including beverage alcohol tariffs. Importers, distributors, and brands are facing cost pressures and supply chain disruptions. Understanding these changes is no longer a luxury—it’s a necessity for survival and growth.
In this presentation, Maria Pearman, CPA and Food & Beverage Practice Leader at GHJ, provides a comprehensive breakdown of the current tariff environment and, more importantly, an actionable roadmap for navigating it.
Navigating Beverage Alcohol Tariffs: Short-Term Tactics & Long-Term Strategies Transcript
Maria Pearman (0:01)
Hi, my name is Maria Pearman, and thank you so much for joining me today for our talk about the latest developments in the evolving tariff landscape in the United States. In today’s conversation, we’re going to cover some background on where we are today in the tariff environment, some short-term tactics that most suppliers can use to respond, and long-term strategies that can be employed going forward.
Tariffs are taxes paid by importers of record on physical products, usually calculated on the value of the imported goods. Historically, these amounts have been insignificant or immaterial, but under the current administration in the US, tariffs have been placed at the centre of global economic and geopolitical strategy, and many iterations of tariff policy have been in play since the beginning of 2025.
As of August 7th, 2025, we are in a state of much more stringent tariffs, with significant variability in rates depending on the country. Up until this point, there had been a broadly applied 10% tariff on most trading partners. Some of the highest rates we’re now seeing are on Brazil, which has incurred 50% tariffs on goods being imported. Laos and Myanmar are both at 40%, and Switzerland is at 39%. An important thing to remember is that goods from Mexico and Canada are exempt from tariffs if they are compliant with the USMCA free trade agreement. This includes many goods and components relevant to the beverage alcohol industry — Canadian wheat and malt are included in USMCA, as is Mexican tequila. So there are some carve-outs that are helpful to our industry, but there are still a lot of details to understand about where the lines are drawn.
Maria Pearman (2:29)
Another very important one for the industry is steel and aluminium, which is subject to a 50% tariff effective June 4th of this year. The impact of this could be extremely significant to the cost structure of goods for suppliers in the industry. The volatility and uncertainty around the rates themselves is also a source of disruption and delay, requiring a lot of extra planning. Financial forecasts that many suppliers have relied upon are now less reliable, and supply chains can take many years to correct. There may also be significant financial resources needed to restructure your supply chain, if that is even possible at all.
So that’s a bit of background on the current state. To illustrate how tariffs work in practice, let’s use Brazil as an example since it currently carries the highest tariff rate. Say a manufacturer is selling goods — in this case, kitchen ware — from Brazil to the US at a price of $20,000. A 50% tariff is applied to that purchase price, adding another $10,000, bringing the distributor’s fully baked cost to $30,000. The distributor then sells to the end consumer in the US, applying a 20% markup to the original purchase price — so $20,000 plus 20% equals $24,000 — and then passes through the $10,000 tariff cost. The sticker price for the end consumer is therefore $34,000, versus $24,000 without the tariff.
Maria Pearman (4:45)
With something this disruptive, how might beverage alcohol suppliers be affected? As mentioned, these tariffs are taxes paid by importers on physical products, usually on the value of the imported goods. There is high exposure across raw materials, packaging, components, and finished goods, since many beverage alcohol suppliers in the US are importing finished goods from regions with a strict geographical designation of origin — meaning there is no easy substitute good. This is on top of already tight margins and pricing pressures in the industry. There will also be long lead times and regulatory complexity around these rules, and the volatility and uncertainty is in itself a disruption to business.
To recap the key imports affected by tariffs: these include ingredients and additives, packaging materials, equipment, and indirect costs. Those indirect costs relate to the logistics environment — for example, freight increases. One tactic to avoid tariffs is rerouting shipments, but when you reroute, you pick up costs elsewhere, such as increased freight. Customs brokerage fees are also likely to rise due to greater scrutiny from customs and border patrol. Storage and demurrage are also apt to increase from delayed customs clearance on at-risk goods. Many different factors, all leading to higher costs.
Maria Pearman (6:45)
With all these headwinds and uncertainties, I want to focus first on short-term tactics that businesses can use today, and then follow up with some long-term strategies. One of the most important tools to consider is the first sale rule. The first sale rule allows US importers to use the price of the first sale in a chain of transactions to calculate customs duty. For example, say there is a manufacturer in Vietnam who sells a finished good to an Australian vendor for $10. The Australian vendor then sells it to a US retailer for $20, and the US retailer sells it to the end consumer for $40. The first sale rule allows the US retailer to pay import duty on the initial $10 price — the first point of transaction — rather than the vendor’s inflated $20. If you have multiple steps in the sale process of a good getting from point A to point B, the first sale rule allows you to attach the tariff to the smallest dollar amount in the chain. It’s worth noting that this rule is currently being challenged by Customs and Border Patrol, but as of right now it is in play and it is valid — so it could represent a substantial saving on the tariffs a supplier is paying.
Maria Pearman (8:38)
Another short-term strategy involves Incoterms. Incoterms is an abbreviation referring to a widely used set of 11 internationally recognised rules that define the responsibilities of buyers and sellers — specifically, who in a contract is responsible for paying for and managing shipments, customs clearance, and other logistics. When you scrutinise your Incoterms and review your contracts, the clarity provided by these rules enables businesses to mitigate the risks associated with sudden tariff changes and ensures smoother international transactions. The key action item here is to review your contracts, the contract terms, and the governing jurisdictions, so that companies can get ahead of potential price increases by determining who will be paying for what and where.
One other key short-term tool is duty drawbacks for exporters. A duty drawback is a refund of tariff-based fees levied on imported goods that are later exported or destroyed. These goods may be unused and in their original state, or they may have gone through a manufacturing process. In beverage alcohol, this will most commonly apply when an import is subsequently exported. Many businesses in the beverage alcohol space don’t take advantage of duty recovery simply because it is tedious and involves a lot of paperwork — but especially in light of today’s heightened tariffs, duty recovery can put meaningful money back in your pocket.
Maria Pearman (10:34)
Those are some short-term reactive strategies. I also want to cover immediate actions you can take today. First, treat tariff monitoring like a weekly KPI. Assign someone in your business to track tariff developments and trade policy updates from trusted sources. Even if no changes are occurring week to week, the discipline of tracking it creates readiness and avoids surprises.
Second, add trade sensitivity to your pricing and cost reviews. When reviewing your cost of goods sold or pricing decisions, include a tariff sensitivity column in your margin analysis, treating tariffs just like any other input cost so you can see the true margin of every SKU you’re selling. This will help firms pre-model the impact of sudden cost spikes and evaluate pricing flexibility. I would highly encourage businesses to increase price to the degree that they can. One of the things I’ve seen most often with clients in this space is a hesitance to take price in the market when they should, driven by a belief that consumers won’t be willing to pay more. I would challenge that. From experience, when prices rise you may lose a little in terms of quantity sold, but you usually make up for it — and then some — through the per-unit price increase. Don’t be bashful about that.
When you add trade sensitivity to your pricing and cost review, you can also forecast the impact of increased costs on working capital needs and target inventory levels. This is really important for suppliers with bank loans that require covenant reporting at the end of each quarter. Most banks will also have covenants related to the asset value on your books, so you need to remember that the extra cost of tariffs will impact your balance sheet — you want to make sure your pro forma balance sheet remains in line with the covenants of any bank loans.
The final immediate action is to use purchase orders with more flexibility and optionality. Adjust your ordering behaviour to shorten lead times and diversify suppliers where possible — even if that means a slightly higher per-unit cost, it’s worth it to avoid tying up a large portion of your working capital in a high-tariff environment. Also build in clauses to your purchase orders that allow for cancellation, substitution, or rerouting if tariff changes create bottlenecks for your company.
Maria Pearman (13:46)
Turning now to long-term strategies. One of the biggest is to diversify the geographic footprint of your supply chain — where possible, shifting from single-country sourcing to regional diversification. Another long-term strategy is to explore manufacturing or co-packing closer to the end market — insourcing, nearshoring, or finding co-packers in the US or in trade-stable countries. This can also reduce freight costs and improve inventory responsiveness, which is key during uncertain trade periods. The bottom line is that you want to pull as much of your production as close to the United States as possible. If you can break up the production process into multiple steps, having as much of that within borders will reduce your tariff exposure.
Finally, on contracts — and this is nothing revolutionary, but it is critically important — structure smart contracts. Review all of your contracts for tariff-sharing clauses, and look at your force majeure and pricing adjustment terms. It is highly unlikely that another party would agree to treating tariffs as force majeure, but it is a strategy worth employing in negotiations. Also consider legal provisions for long-term flexibility — build as much flexibility as possible into your contracts, and define clearly how the cost of tariffs will be shared.
Maria Pearman (15:24)
To recap, short-term tactics include: adjusting your ordering behaviour to shorten lead times and diversify suppliers; using the first sale rule to apply tariffs to the first transaction in a chain; driving clarity in your contracts via Incoterms rules; adding trade sensitivity to your financial models; negotiating flexibility into your purchase orders; tracking and treating tariffs like a weekly KPI; and taking advantage of duty drawbacks for exporters.
On the long-term strategy side: diversify the geographic footprint of your supply chain; drive more manufacturing closer to the end market; and negotiate more favourable contracts. The long-term strategies may take years to implement — the short-term tactics are all things you can action within the next 90 days.
Maria Pearman (16:36)
In addition to those tactics, there are resources and tools available. The HTS Lookup is a tariff schedule showing the category that virtually all goods fall into. USTR.gov — the Office of the United States Trade Representative — publishes press releases and news relevant to the topic. There are also duty calculators and CBP guidance available online; Customs and Border Protection provides guidance on tariffs and is a great place to look for the latest developments. Thanks for joining today. My name is Maria Pearman, and I hope to see you again soon.
More Resources on Tariffs
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