When Caledonia Spirits, a Vermont-based distillery known for its Barr Hill Gin, spent four months preparing an order for shipment to Quebec, the company expected their bottles to reach customers across the border.
Instead, after President Donald Trump announced tariffs on Canada in early February, the order was abruptly canceled.
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This decision is leaving the business with potentially unsellable inventory and an uncertain future in the Canadian market, even after the Trump Administration announced a 90-day pause on many non-China tariffs.
The company creates bottles and labels to meet Canadian regulations, meaning they can’t easily repurpose the spirits in other markets.
The situation is not unique to Caledonia Spirits. Vermont’s Secretary of Commerce, Lindsay Kurrle, described the issue as a major disruption for small businesses exporting to Canada. “Vermont producers who have prepared alcohol to be sold in Canada are left with this alcohol that can’t just be sold here,” Kurrle said at a press conference. “It’s not an easy fix. It costs money. It takes investments.”’
How do the tariffs impact Vermont businesses?
As small businesses across Vermont and the U.S. deal with the financial consequences of shifting trade policies, understanding the impact of tariffs and preparing for sudden changes is proving critical.
Governor Phil Scott acknowledged the challenges, stating that these tariffs are straining relationships between Vermont producers and Canadian retailers.
“It’s creating this divide, and they’re taking your product off their shelves because they don’t want it there anymore,” Scott said. “It’s unfortunate. These are our friends.”
When businesses depend on exports, tariffs can shut down vital revenue streams. Finding alternative buyers in a short timeframe isn’t always feasible, especially when products are customized for foreign markets.
Businesses that are able to export their goods or rely on imports are often left with two choices: absorb the cost of tariffs and take a financial hit or pass those costs onto their customers through increased prices, which can make them less competitive. Neither option is ideal.
Kurrle says she’s been in contact with the consul general for Canada and is working to find a solution for Vermont businesses.
"Our goal is to try to find out what does Premier Legault need to see from us to try to get Vermont products back on the shelves," Kurrle explained.
Governor Scott also created an interagency task force, led by Kurrle, to monitor the impact of tariffs on Vermont businesses and consumers.
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Financial strategies to reduce the impact of tariffs
Trade policies often change, and it can be frustrating for businesses to navigate. However, some steps can reduce your exposure to tariff-related disruptions.
Explore domestic growth opportunities
Since tariffs primarily affect cross-border trade, focusing on domestic expansion can help businesses maintain revenue. Seeking partnerships within the U.S. can offset lost international sales. For example, distilleries could collaborate with American hospitality chains, restaurants, or local retailers to increase domestic distribution. Another option is expanding your product offering to appeal to a larger customer base.
Apply for tariff exemptions
Some industries or specific products may qualify for tariff exemptions. In 2019, Apple successfully applied for tariff exemptions on certain imports. While smaller businesses generally lack the lobbying power of major corporations, industry groups and coalitions can sometimes advocate for exemptions. It may be worth researching available programs or consulting trade organizations for assistance.
Negotiate with suppliers
Businesses can also look at renegotiating their own supplier contracts to mitigate the impact of tariffs. This may include negotiating bulk purchase discounts, requesting suppliers to share some of the tariff burden, or locking in long-term contracts that secure stable pricing.
Optimize your supply chain
Reducing operational costs in other areas can help offset the financial impact of tariffs. Businesses should examine their supply chain for inefficiencies, such as unnecessary expenses in shipping, packaging, or inventory management. Exploring automation, adjusting logistics strategies, or reducing overordering can help minimize costs.
Leverage government assistance programs
Federal and state-level programs may offer financial relief for businesses affected by tariffs. Programs such as Small Business Administration (SBA) loans, export assistance grants, or state trade expansion programs (STEP) can provide funding and assistance to help businesses adjust.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
