American Liquor Maker Moves Production to Canada Amid Trade Dispute
Phillips Distilling, a family-owned American liquor company, has relocated part of its production to Canada after losing 70% of its Canadian business due to provincial bans on US-made liquor. The bans were imposed by several Canadian provinces in response to US tariffs, significantly impacting Phillips Distilling’s sales, especially of its popular Sour Puss liqueur.
Why this matters
The move by Phillips Distilling highlights the tangible effects of ongoing trade tensions between the US and Canada on businesses and consumers. The relocation not only allows the company to regain access to the Canadian market but also reflects how trade disputes can reshape supply chains and production strategies. It also underscores the influence of provincial governments in Canada’s alcohol market and their role in trade negotiations.
Background
Since spring 2025, most Canadian provinces have boycotted American-made liquor as retaliation for tariffs imposed by the US government under President Donald Trump. The boycott began with Ontario, whose liquor board is one of the largest alcohol purchasers globally, and quickly spread to other provinces including Quebec and British Columbia. By May 2026, only Alberta and Saskatchewan continued to sell American alcohol, due to their fully privatized liquor retail systems.
Phillips Distilling, based in Minnesota, saw a sharp decline in Canadian sales, with Sour Puss—its most popular product in Canada—being hardest hit. CEO Andy England described the loss as “a disaster” and noted that Canada is by far the largest consumer of Sour Puss.
Key developments
- In response to the ban, Phillips Distilling began exploring options to move some production to Canada.
- By October 2025, the company signed an agreement with Montreal-based manufacturer Station 22 to produce its products locally.
- Quebec was the first province to allow the return of Phillips Distilling’s products, which helped facilitate negotiations with other provinces.
- As a result, Phillips Distilling’s products are now back on shelves across Canada, marking a recovery for the company.
Market impact
The relocation has been welcomed by Canadian distributors, who appreciated the company’s efforts to maintain supply despite the trade barriers. For consumers like Stephanie Intrevado from Quebec, the return of Sour Puss was a cause for celebration, as the brand has a strong following among Canadian university students.
Experts note that Phillips Distilling’s ability to shift production north is partly due to the nature of its products, which are not tied to specific geographic origins like Kentucky bourbon or California wine. This flexibility has allowed the company to avoid reputational risks in the US while maintaining its Canadian market.
Trade dispute status
The liquor sales ban remains a significant point of contention in ongoing trade negotiations between the US and Canada. US officials have criticized the ban as “outrageous” and “disrespectful,” while Canadian Prime Minister Mark Carney has suggested provinces might lift the ban if US tariffs on key Canadian sectors such as automotive, metals, and lumber are reduced or removed.
However, the decision to sell American liquor ultimately lies with provincial governments, making the situation unpredictable. The trade dispute shows no signs of resolution, and the long-term effects on cross-border trade and production remain uncertain.
Looking ahead
For Phillips Distilling, the experience has prompted a strategic shift in how the company operates, likely influencing its business model for the foreseeable future. The company’s move to produce in Canada may serve as a model for other US liquor producers facing similar trade barriers.
Recommended reading
For more context, see related Peack News coverage and explainers linked below.
