Ryan Christiansen, president and head distiller at Caledonia Spirits, giving a tour in Montpelier, VT.
Courtesy: Ryan Christianse | Caledonia Spirits
President Donald Trump’s tariff rhetoric against Canada has only started to heat up, but Vermont’s small businesses are already feeling some pain.
A shipment of spirits, ordered by the Société des alcools du Québec – an entity that’s responsible for the trade of alcoholic beverages in the province – has been sitting on a shipping dock at Montpelier-based Barr Hill by Caledonia Spirits for about a month.
The SAQ called off the order shortly after Trump announced the tariffs against Canada in February, according to Ryan Christiansen, president and head distiller at Caledonia Spirits.
“Customers are ready to buy, and we are in the peak of slow season – it’s an annual cycle for us, and we were looking forward to shipping the order. Now, it’s sitting on the dock,” he said. “To have this hit our business in the slow month of February? We missed our financial plan in February because of this.”
Exports at Caledonia Spirits in Montpelier, VT.
Courtesy: Ryan Christiansen | Caledonia Spirits
Vermont has a special relationship with Canada, as the Green Mountain State exports $680 million in goods to the U.S.’s northern neighbor annually, according to data compiled by Connect2Canada. Vermont imports more than $2.6 billion in goods from Canada each year, with electricity and fuel oil among the top imported goods.
Because of the state’s close business ties to Canada and their shared borders, small businesses in Vermont began seeing some fallout as early as February – when Trump first announced a round of 25% tariffs on goods from Mexico and Canada, triggering 25% retaliatory levies from then-Canadian Prime Minister Justin Trudeau. At the time, Ontario also said it would pull American alcohol products from its shelves.
Ultimately, Trump granted a reprieve on Canadian and Mexican goods covered by the North American trade agreement USMCA until April 2. However, many products are still subject to the duties.
“We worked really hard to maintain this relationship with the Canadian government,” Christiansen said. “How do I get them to buy as much as the Canadian customer wanted to buy? Even if the tariffs go away, I think it’s overly optimistic that this order gets resubmitted.”
Tourism worries
It didn’t take long for Steve Wright, president and general manager of Jay Peak Resort, which is about 10 miles from the Canadian border, to begin seeing the impact of the rhetoric around tariffs.
He noted that spending from Canadian tourists showed signs of softening particularly in two key weeks: Quebec break week, which ran from March 3 to March 8, and Ontario break week, which kicked off on March 10.
Though Canadian visitors generally account for about half of the resort’s market, they make up virtually all of it during that two-week stretch, Wright said.
People ski at Jay Peak in Jay, VT.
Courtesy: Patrick Coyle, Darla Mercado | CNBC
“The Quebec break week sold really well, and we had great conditions, but what was missing was the day market,” he said. “We did not get the day traffic we usually see from Montreal, that part of the market softened up.”
Tariff rhetoric has only been the latest pressure point for Jay Peak. The resort’s manager also pointed to the reduction in hours of operation for the nearby North Troy, VT border crossing. It went from 24 hours a day to 8 a.m. to 8 p.m. in January.
To accommodate its Canadian clientele over the past two decades, Jay Peak has been offering at-par options for these tourists on non-margin products. “Say a lift ticket is $100, you can give us C$100,” Wright said. “That has insulated the business a little bit.”
“They have an affinity for Jay Peak; they have been coming here for a generation, but there is a point where they will decide to stay home despite their love of the place,” he added.
In Montpelier, which is a roughly two-to-three-hour drive from Montreal, worries about tourist traffic are already bubbling among small businesses. This corner of the state tends to see weekend visitors from up north, particularly in the temperate summer and fall seasons.
Bill Butler, a co-owner of Artisans Hand Craft Gallery, has been in talks with fellow entrepreneurs in downtown Montpelier to propose promotional deals for Canadian visitors to keep the foot traffic coming.
“My idea is to have something like ‘Canada Days,'” he said. “We’d have a deal for Canadians who want to come down, have a little tour of the city and go from place to place, and get a free beer or coffee.”
“I would rather take the position of being proactive and not just thinking about absorbing the problem,” Butler said. “We have a great relationship with Canada, and we see a lot of Canadians in the gallery.”
The price of imported goods
For Sam Guy, owner of Guy’s Farm & Yard in Morrisville, tariffs are raising concerns over higher prices for certain products.
Wood shavings, wood pellets and peat moss sold at the local chain store all come from Canada, while animal feed – though made by an American company – includes ingredients that come from Canada, he said.
A 25% tariff tacked onto imported products would inevitably have to be passed on to shoppers.
“We can’t eat this,” Guy said. “We’re going to pass on the tariff. We’re not going to add a margin or anything like that, but a lot of these are low margin products.”
