With the continued discussion around tariffs implemented on international exports and their effect on domestic industries, talks of reciprocal tariffs are now a concern for U.S. exporters, specifically those in the distilled spirits business.
Eric Olson owns Central Coast Distillery in Atascadero. He says the newly-imposed tariffs could affect the price of crucial items he needs for his new location and certain spirits.
“We've got to start buying some Chinese glass," Olson explained of some of the materials going into the construction of his 5,000 square-foot distillery. "We have our amaros and our gins. We have botanicals from all over the world.”
But with potential retaliatory tariffs from other countries looming in the wake of the current administration’s tariff plan, it could make exporting their distilled spirits to other countries costly.
“We might hold off. We might just hold off on that plan to export because just the shipping alone is very expensive right now and then you add tariffs on top of that, that might make it too expensive to make any profit on it,” he said.
Cal Poly professor of agribusiness, Ricky Volpe, explained that if other countries pass their own tariffs against U.S. exports like liquor, there could be a shift to look at their domestic options.
“It's a pretty safe bet that customers in the EU, in Australia, in, you know, Canada and Mexico, if they see the effective price of American products go up, they're going to do exactly what our customers would do and switch to domestic because they're going to be relatively cheaper," he explained.
For Volpe, he thinks domestic companies will resort to shrinking their margins to weather the financial hit.
“In the short term, we'll see margins get shrunk a little bit, but that's not a long-term play. That's not sustainable," he said.
But local distillery Rod and Hammer has a different plan. One that looks to take advantage of the situation.
“We definitely see the tariffs as a signal that it's really time to invest even deeper into local American craft," co-owner Rod Cegelski explained.
Focusing on expanding domestically and in the state of California, Rod and Hammer doesn’t have an international presence, which allows them to focus on and expand locally and on the West Coast to create an opportunity for people to buy local craft spirits at a better price point.
“We don't stretch across the pond to go sell product yet. We're small producers, so what we produce, we sell," Cegelski said.
