Canadian duty free, already suffering through its toughest period in years post-pandemic, could be devastated by the proposed tariffs coming from the U.S., the source of its most important customer. Travel Markets Insider speaks with three Canadian land border operators at the IAADFS Summit of the Americas in Miami about what is happening on the ground in their stores and what, if anything, they can do.
Tania Lee, FDFA President and owner of Blue Water Bridge Duty Free, tells TMI that even before the talk of tariffs, the Canadian duty free industry was struggling to compete with U.S. retailers.
“We were down 95% during Covid, with the east and west disproportionately affected, especially coming through recovery in the last two years. Then you end up with the tariffs coming back and forth,” says Lee. “There has been a huge sense of uncertainty. Trump came out with tariffs. We hit them with retaliatory tariffs, pulled back, hit them again. People don’t know what’s happening.”
The timeline over the past six weeks paints a stark picture of uncertainty for this trade war between the United States and Canada.
On President Trump’s first day in office in January, he said he expected to put 25% tariffs on Canada and Mexico beginning on February 1. Then on February 1 he signed the executive order that would begin these tariffs on February 4. On February 3, Trump agreed to a 30-day pause on his tariff threats against Mexico and Canada. On March 4, the 25% tariffs on imports from Canada and Mexico go into effect. Canada immediately announces retaliatory tariffs against the U.S. Ontario Premier Doug Ford orders LCBO to immediately remove U.S. alcohol from shelves in response to the U.S. tariffs. On March 6, Trump postpones the imports from Mexico and Canada for another month.
“Any one of those things that make it uncertain at the border is going to make people not travel, compounded by the fact that our premiers from different provinces have been telling people don’t travel. It is creating a sense of nationalism across Canada. It’s Canada first. Don’t go there. Don’t buy anything in the States. We even had a day February 28 of don’t buy any U.S. products, and people didn’t. So what does that do? It makes people not travel,” says Lee.
Chris Foster, owner of Queenston-Lewiston Duty Free in the Niagara area says Canadians have already begun picking other locations to travel to instead of their normal trips to the United States.
“I see people going to the Turks and Caicos. They’re not coming to Florida, they’re not going to Vegas, they’re not going to California. They’ve traded off those U.S. sunny destinations for the Caribbean, Mexico, Jamaica, the Dominican Republic,” says Foster.
One thing is for certain, says Lee. Her store is not busy in what should be a time of increased cross-border travel.
“Premier Ford took all American liquor products off the shelf, so we’re not able to buy any more American products as it stands today. But we can sell through the existing stock we have. But we need customers,” says Lee. “This is March break. We should have seen packed parking lots. No, it was actually a ghost town. It was scary because it kind of reminded me of Covid times.
“I’m about 30% off this month, which is not good.”
Jeff Butler, owner of Thousand Islands Duty Free, tells TMI that the potential tariffs are creating multiple issues.
“There’s no duties or tariffs that are being applied to our inventory. We just can’t buy it because the provincial Liquor Board has said we’re not going to sell any more. So it’s a supply chain issue for us,” says Butler. “The other issue is how those products are being interpreted when they’re going, either into the U.S. from our stores, or if Canadians are returning. There’s uncertainty as to how they’re being treated by rule. Canada has been a little bit more specific outlining the rules, but the U.S. hasn’t outlined the rules in a really clear way.”
FDFA Trade War Room
As a response to the ongoing disruptions created by the potential tariffs, the FDFA has been doubling down on its government relations.
“We have created what we’re calling a trade war room. And we’ve been in the war room since February. As an association we’ve been government relations right across the board. We’ve been advocating because we need help in our stores. There are things that we are advocating for that the government can do to help us right away. These are things that can easily be done, and can help this industry right now, because the next while is going to be pretty difficult for us,” says Lee.
One of the main things the FDFA is calling for is to stop putting domestic policies on the tax and duty free industry.
“We are export. That’s a huge thing,” says Lee.
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The 51st State
President Trump’s consistent referral to Canada as the 51st state of the Unites States has been a unifying point across Canada, says Lee.
“Calling us the 51st state was a huge galvanizing point,” says Lee.
“We have always had nationalism in Canada. And we have focused on Canadian craft spirits. We’ve always had a position where we push Canadian as much as possible, but not at the expense of having global partners too. We rely on the popularity of brands,” says Foster.
At the Summit of the Americas, the Canadian operators are meeting with suppliers and planning for the uncertain future.
“We hope that this is a short-term problem. We talked with suppliers about continuing with plans for the summer, hoping that the tariffs will be delayed and or just completely abolished,” says Foster.
“Our message to all of our suppliers is that we’re going to continue to serve the customers. We can’t control the geopolitical things, but we can continue to plan for the eventuality that things will return to a more normal state,” says Butler.
