The Decibel - The booze war within the trade war

Episode Date: October 1, 2026

In the trade war between the U.S. and Canada, alcohol has been a bargaining chip on both sides of the border. Early in 2025, Canadian premiers pulled U.S. booze off of Canadian shelves. Then, last month, the Trump administration slapped a 50-per-cent duty on hundreds of Canadian goods including beer, wine, cider and most spirits. Notably, the U.S. cited the provincial shelf bans as justification for their tariffs. And now, the U.S. has implemented an outright ban on that same list of alcohol products.Jennifer Robson, an associate professor of political management at Carleton University, will explain why booze has become a focal point amid continuing trade tensions.Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Amidst the trade war with the U.S., there are tensions brewing over alcohol. On Tuesday, the U.S. banned imports on a number of Canadian goods, like motorcycles, some dairy products, and most imports of beer, wine, cider, and liquor. Alcohol has become a major focal point in this trade war. Early in 2025, provincial premiers pulled U.S. liquor off Canadian shelves, and most of those bans remain in effect today. That shelf ban was used as a justification for the 50% U.S. tariffs slapped on hundreds of Canadian goods. Those came into effect in August.

Most alcohol from Canada was on that list. But as of Tuesday, those alcohol products are now outright banned from entering the U.S. The thing is, though, in dollar figures, alcohol is nowhere near the biggest trading issue between the two countries. It made up less than 1% of the roughly 1 trillion. dollars of total trade between the two countries last year. So why has alcohol become such a big deal in this trade war? Jennifer Robson is an associate professor of political management at Carlton University. She's been following what's been going on with booze in this trade war,

and she's been looking at data on how the shelf ban has impacted the market. Today, she's here to talk about this fight over alcohol, and how something like a case of beer can affect the broader trade war. I'm Manika Ramman-Wilms, and this is the decibel from the Globe and Mail. Professor Jennifer Robson, thank you so much for being here. Thanks for having me. So this past Tuesday, the trade war escalated yet again with these new American bans. Some goods can no longer enter the U.S. at all.

And this includes most alcoholic beverages from Canada. From what you're seeing, how big of a deal is this escalation from the U.S. side? Yeah. So, look, I think that if you are in the business of producing alcohol and Canada, this is going to hurt, you know, in terms of the total export market for Canadian beer, wine, spirits. The United States is an overwhelming majority. So it's about 100% of our beer. That was the export market, right, in terms of just exports, right, beyond what we're consuming domestically. And, you know, and sort of upwards of 90-ish percent for wine and spirits. So,

yeah, look, if you're... So we send a lot of alcohol to the states, it sounds like then. Wow. Well, of the alcohol that we produce, we send an important share of it. the States, right? And there's, look, Canadians can drink, sure, right? But, you know, can me and do we want to increase domestic consumption enough to make up for that export market? Okay, that's a separate issue. As I think you pointed out in the introductory remarks, this is a very small share, though, of total trade between the two countries in terms of Canadian exports down to the U.S. Like, this is a, you know, this is quite a small amount. So, like so many things in this ongoing trade war, there's sort of, there's the big macro picture

right, which is increasing irritations. This is an escalation. I'll say more about that in just a moment. But the real impacts are being felt, you know, at the sort of the local level, right? But small firms that are going to be most hit by this. But this is an escalation. And unlike previous rounds in this ongoing dispute between Canada and the U.S., this is the first time that we've actually seen a full-out import ban, right?

which is a real escalation in terms of saying your product just cannot come into the United States. It's not about a tariff level, right? It is a full-on ban. And that is a new thing in this trade war. And this ban on alcohol, it also seems to be a bit complex because it depends on where things originate and where they're packaged and the volume of alcohol. Why is this so confusing? Why has this been designed in this way? Oh my God. Yeah, like make it make sense, right? I mean, I don't know how many of your listeners will have done this, but I invite the nerds out there to go to the White House, find the presidential proclamation, and read through the listed goods that are banned. And they're all listed by these like integrated trade codes, right? And there's a lot of confusion in there.

Like, there's complexities in terms of, is the product packaged versus unpackaged? By the way, packaged means like it's in anything that's, ready to go directly to a consumer, like a can, a bottle, a keg. Rye whiskey that is unpackaged is subject to the ban when it is under four liters, but it is also subject to the ban when it is packaged and in containers that are greater than four liters. So there's all of these complexities, and I think that this is an important point because some of the emerging research around complexities and changes in trade rules, like tariffs,

right, is finding that actually that the tariff confusion itself suppresses and reduces trade between trading partners. Okay, so we've gone over this span a little bit, the complexities that are involved in this. Let's look at the big picture here, Jennifer. Like, in terms of economic importance, alcohol is not a top trade issue between Canada and the U.S., right? But it has become this focal point of this trade war. Yeah. What is it about alcohol that's drawn this kind of attention? Well, okay, so I would say, let me talk in sort of like there's the practical politics of it,

and then there's sort of the symbolic value, right? So the practical politics here are that the shelf ban that was implemented by provinces in March 2025. And let's just remember that was in response to U.S. tariffs on Canadian steel and aluminum. So that was a counter response to an action by the Americans. That it does have this sort of like political say. because if you look at where an awful lot of American products, alcoholic products come in from, it is in politically important regions of the United States. So wine, mainly from California, spirits, mainly Kentucky, Tennessee, Texas. And for a country that is about to hit midterms,

it's not so much that we can necessarily map directly potential toss-up states on the basis of alcohol production and exports, except for maybe Texas, where it looks like they might flip us seat and two house seats. And there's some seats in the House in California that might flip as well. But those are also seats that are important in terms of Trump's political coalition, right, his political base. So we're targeting specific parts of the U.S. that could then potentially put pressure on the president. And look, you know, for example, when the LCBO actually implemented their shelf ban, they were pretty straight up about this, right? They put it in their letter to U.S. suppliers. We encourage you to speak with your member of Congress and senators about

the impacts to your business and the need to remove tariffs on Canadian goods and products. So they said, you know, please talk to your elected representatives. And they did. The American alcohol producers did. And so they lined up, for example, Republican representatives who any time that Ambassador Greer appears before Congress, you know, they're asking about what are you doing to get the Canadians to remove the shelf ban. This is Jameson Greer. The Trace. And Greer. Yes. Yeah. Ambassador Greer appeared before Congress and was asked, was asked about, you know, what are you doing to remove the shelf ban. So there is political pressure that is being applied by these affected regions. So, you know, that's how the system's supposed to work. But I think there's also this symbolic

element where, look, alcohol is really reflective of place, right? It's sort of got this symbolic value of, well, you can kind of only get Tennessee whiskey from Tennessee, right? And there is something unique about California wine because of the climate, because of the soil, yaddiata, right? So I think that there's something emotional about it then is what you're kind of saying. Yeah, I think there's something kind of emotional and symbolic about for the American administration that they can't quite wrap their head around this idea that Canadians have said we're not buying your stuff. Yeah, from what you're saying, it almost seems like it's a personal attack, even though this is kind of an economic situation here, but maybe this is being perceived south of the border as a more

personal thing. You know, I can't help but think that when you pay attention to what, for example, Terry Lutnik has said he's called the shelf ban disrespectful and insulting. It is outrageous that Canada will not put U.S. spirits on the shelf. It is insulting. That implies that somehow, you know, Canadian consumers should be so lucky to be able to do business with the Americans. And certainly, as I've said, you know, a lot of Republican senators and representatives have called on the trade representative, Jameson Greer, to make. like force Canada to change course. So I think there is this, there is a symbolic thing that is maybe eliciting a bit of an emotional reaction. There's also something very distinct about

alcohol, right? Because it's not a necessity like energy is or like food is. So how does that make it to maybe a different kind of tool in this kind of trade war? Right. Yes. So first of all, we could all manage to get along just fine without beer, wine, and spirits, right? They are not necessities. They are, they are luxury goods. And also, these are also goods where we have an awful lot of choice as consumers. So if California wine is no longer available to you, guess what? There is an entire world of product out there that you can choose from. And certainly the alcohol retailers in Canada have made that really clear, right, by using shelf space that had previously been available for American products. Now you'll find all kinds of things that

are available to you from around the world. So it is an interesting element that way. It's a discretionary and luxury good. And it's one where actually provinces have kind of a unique policy lever here. Let's talk a little bit about that because maybe part of the irritation on the U.S. side when it comes to alcohol here is the way it's sold and distributed in Canada, because our system is a lot more fragmented because of all the provinces having jurisdiction here. So what about our system is maybe making it difficult for the U.S.? Yes. In the vast majority of provinces, with the exception of Alberta, alcohol distribution is essentially a government monopoly, right? And in many provinces, in some way, shape, or form,

there is also a retail monopoly, right? Or at least, you know, in terms of some of the retail warehousing and then sales to consumers, although that's obviously shifting. That is not the landscape in the United States, right? They are much more privatized. So only 17 states actually have sort of any effort at the state level to control the licensing and distribution of alcohol sales in their state. Whereas Canada, we have, you know, I'm speaking to you here in Ontario. So we have the provincial LCBO that is, in fact, one of the largest alcohol purchasers in the world. So it's interesting that even in terms of purchase decisions, these provincial monoccurricular, monopolies actually have a fair amount of market power, right, in terms of what they are choosing to

retail and not. And again, Canada is the destination for about 20% of U.S. alcohol exports. And there's just no other country that comes close. We'll be right back. Let's spend a little bit of time now, Jennifer, actually talking about the impact of these provincial shelf bands when it comes to the Canadian consumer. I know that you looked at what happened to U.S. alcohol imports in Canada after the U.S. alcohol imports in Canada after the these provincial shelf bans were implemented. What did you find? Yeah.

So what I did was I just wanted to know what has actually happened because, again, these are shelf bans. So it makes it more difficult for us as consumers to obtain American alcohol products, but not impossible, right? If we were really determined, we could figure that out. So I wanted to know what had actually happened. And so I went looking at the monthly import data of alcohol coming from the United States into Canada.

And that's a bit of a lagging indicator of domestic demand, right? We won't continue importing things if there isn't a demand or if, in fact, the shelf ban means most people are not looking to buy it. Before the shelf ban, just to give you, you know, some comparisons, Ontario was averaging about $41 million a month in alcohol imports from the United States. But we're seeing now, since the shelf ban, the average monthly imports are down 94%. It's down 77% in Quebec. Some Atlantic provinces, down to zero dollars, so like a hundred percent decline. And I guess that's what we would expect to see, though, after your shelf-bend?

Because like you said, most people, that's how they get their alcohol, right? Exactly. They're not going to go to the trouble of figuring out. How do I get a direct case of my California Merlot sent to me, right? That's too much trouble, especially when there's like good French wine or good Italian wine or other options available to you. So the shelf-bans have worked. And if anybody is interested in seeing my numbers, this is all available on my substack piece. But what's also interesting is that actually the imports had declined before the shelf ban went into place. So it seems as though perhaps consumers led policymakers on this, that Canadian consumers were already marching with their own wallets

before March 2025 in terms of avoiding some of those American products. And then that would mean that there would be less of a signal, right, to import more of them. Do we know when we started to see that consumer decline? Yeah, we can start to see it. I would say, kind of around December, January. So December 2024, January 2025, which of course also overlaps with, you know, the transition of power from the Biden to the Trump administration. And I'm sure listeners will remember that was also when Donald Trump started posting memes about conquering Canada and calling our prime minister governor and calling us the 51st state and so forth. Many provinces, of course, still have that shelf ban in effect. But Alberta and

Saskatchewan both lifted their shelf bans after a few months. Saskatchewan did introduce a 50% levy on U.S. alcohol recently. But Jennifer, if we look at data from those two provinces, what can we learn from their experience? Yeah. These two provinces are interesting because they're a bit of the counterfactual for like what would happen. Like would sales recover if the shelf ban were lifted, right? So let's imagine a world in which some agreement is reached and the shelf bans are lifted, are Canadian consumers going to go back? And what I see is probably not, at least not to the same extent of what we were previously purchasing in terms of American product. In Saskatchewan, for example, imports, since the ban was lifted, the shelf ban was lifted,

the imports are still down, 63% into that province, which is quite striking. It's a little different in Alberta. It's imports of U.S. alcohol are still down, but it's only, only about 17%. And the main thing that seems to be keeping things afloat in Alberta's is just this this kind of unusual provincial demand for California wines, it seems. I don't know, there's maybe just like some amazing pairing between like a California red wine and Alberta state. Maybe it's magic. I don't know. But they like their California wines. They really like their California wines. So that's the one that like rebounded the fastest and is, you know, whereas like beer and spirits has not really fully recovered in Alberta. And I think it's also important to.

Remember, Alberta is also fully privatized. So, like, their wholesaling, their warehousing, their distribution, all of that is, like, fully privatized. So you don't necessarily have kind of, like, one provincial market maker, right, shaping things there. And so it's possible maybe these private retailers just had unique relationships with U.S. suppliers or, you know, all those sorts of possibilities. Before trade talks fell apart between the U.S. and Canada back in August,

the shelfbans were an issue that was being talked. about because Prime Minister Mark Carney seemed to be asking provinces to lift those shelf bans maybe in exchange for other things while they were negotiating this trade deal. This was met with some reluctance from the provincial leaders. Why were they so attached to these shelf bans? This has been something that obviously got the attention of the United States administration, of other Americans in and around the administration. And so it has salience, right?

It has power. There are certain things that we are looking for in terms of the trade agreement with the United States. And there would be, I'm sure, a concern around putting down this one tool that has that symbolic value, that political value, that salience. It really would depend on, well, what does Canada get in exchange? So Ontario rules around the auto sector, steel aluminum in Ontario, forestry in BC, steel aluminum. steel aluminum also in Quebec. These are important sectors. And politicians, of course, need to be able to show that when they've made a deal that there is something in it, right, for their constituencies. Now, listen, we don't know. We don't know the content of what that

deal was potentially on the table. We've certainly heard that a deal was taking shape at a high level, but there were sort of 11th hour additions, changes that meant that the Prime Minister Feldy had no choice but to walk away. But I think we, there may be an issue here in terms of did provinces feel that what Canada was potentially about to get, was it good enough for them to feel confident that they could face their own electorate, face their own voters, and say, I'm prepared to lift the shelf ban because we got enough of what we need. We've talked a lot about Canadian sentiment towards American alcohol here. Do we have any sense, though, about the other side of things? Like, how are people in the U.S. feeling about this

situation? Within the industry, I think I mentioned previously, they have felt some economic pain. And as a matter of fact, the U.S. industry led by, I guess, it's the Distilled Spirits Council in the United States, has created something they're referring to as the Toast's, not Tariffs, Coalition. And that coalition has come together representing, you know, a fairly wide swath of wine growers and distillers and beer makers. And they are starting to talk about the loss of economic activity and have written to the president to express their desire to find some kind of resolution to the situation and actually wrote to the president asking him not to put in place the import ban because they feel like that will just continue to hurt the overall alcohol and adjacent industries in the United States.

Again, they're taking a fairly generous definition. So they are including bars, restaurants, those sorts of things, the hospitality sector, right? That is sort of immediately adjacent to the producers. Just before I let you go here, we've talked now about this ban that's come into effect and this escalation that's happening with this trade war. In the broader sense of things here, what does this fight over alcohol tell us about how Canada and the U.S. are really using economic pressure against each other in this broader trade war? One thing that I find really interesting about this is that this is asymmetric, right? The United States is a much bigger. It's a much bigger economy. We are more reliant on the United States in terms of

export market than they are on us. And we're also fairly integrated in terms of our economies. Over the years, we have developed these specializations across the borders where, for example, you know, we grow a lot of apples. The Americans grow a lot of pairs. And we trade back and forth. And that specialization had been good for both sides for a very, very long time. But now here we are. And I'm aware that, you know, even just in the last couple of days, Donald Trump has said, set this up again as a win-lose disagreement where he is saying that what he anticipates as next steps is that the Canadians, as he refers to us, will come and say, I'm sorry, sir, and request a deal where we will essentially down all of our tools. And if anything, that is likely to harden

Canadians resolve, that we are not going to simply accept that we will be the losing party in a trade negotiation with the United States. So another difference, even though there is a asymmetry, is that American public sentiment is not behind the White House approach and strategy, whereas the public opinion research is pretty clear. Canadians are fairly unified and cohesive around our federal government's approach and strategy. And even amongst provinces, there's been a market degree of cohesion in terms of what the approach should be. So that is a strategic advantage.

That's an important part of our strength in how we are weathering this difficult moment. The alcohol example tells me that Canadian consumer choices and behaviors are maybe shifting, right? And that Canadians themselves actually have a fair amount of consumer power here. And I think it's also important to recall that while there will be businesses that are impacted, we are also stronger in our country in terms of policy response than the Americans have been so far for their affected industries. So we have done more to ensure that there are programs to support workers, to encourage businesses to find other export markets. And so I actually feel more optimistic with the Canadian side in terms of our ability to withstand the pressures of this current moment. Professor Jennifer Opson, thank you so much for taking the time to be here.

Thank you. That was Jennifer Robson. She's an associate professor of political management at Carleton University. That's it for today. I'm Manica Ram and Wilms. This episode is mixed by Rachel Levy McLaughlin. Our producers are Madeline White, Cheryl Sutherland, Rachel Levy McLaughlin, and Michal Stein.

Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening, and I'll talk to you tomorrow.