Alcohol finds itself in the midst of a growing global trade war, with U.S.-based companies facing significant risks, according to industry experts.
President Trump recently threatened to impose 200% tariffs on imports such as wine and Champagne from Europe unless the European Union reverses retaliatory duties on American whiskey. Additionally, the threat of 25% tariffs on Canada and Mexico has led to uncertainty and boycotts of U.S.-affiliated products.
These tariffs and resulting backlash not only restrict the market for U.S. spirits producers abroad but also pose challenges for American companies that rely on imported beverages.
Spiros Malandrakis, head alcohol researcher at Euromonitor, highlighted the detrimental impact of the tariff war with Europe on American-made alcoholic beverages like Kentucky bourbon, which have gained popularity in the continent over the years.
“Consumers are not thinking strategically; they are driven by emotions,” Malandrakis explained. “They now have more reasons to choose Scotch whisky or Irish whiskey over American brands.”
If tariffs are implemented, the sales of U.S. alcohol brands in Europe could decline rapidly, similar to the swift boycott of whiskey in Canada following Trump’s tariffs. The market for whiskey exports experienced a significant drop during Trump’s initial term but saw a 60% increase after the tariffs were lifted, according to the Distilled Spirits Council.
Malandrakis emphasized that the actions of France and Italy will play a crucial role in Trump’s tariff negotiations with Europe, given their significant alcohol exports. French Prime Minister Francois Bayrou expressed concerns about the impact on France’s cognac market following the EU’s targeting of American whiskey.
Regardless of tariffs, the backlash against the Trump administration abroad has led consumers to distance themselves from American companies. Malandrakis cited the declining sales of Tesla cars in Europe amid Elon Musk’s controversial involvement in U.S. policy.
“Even if tariffs are reversed, changing consumer perceptions is not as simple as issuing an executive order,” Malandrakis noted. “European consumers, regardless of political stance, strongly oppose these actions.”
The CEO of Brown-Forman, the maker of Jack Daniel’s, stated that Canadian retailers removing their products from shelves is more concerning than a tariff. The company is preparing for potential similar actions from EU countries, which account for a significant portion of its sales.
Tariffs Impact Winners and Losers
Ed Brown, a partner at Burr & Forman specializing in beverage industry clients, explained that mitigation strategies for beverage companies facing tariff challenges will vary depending on the type of alcohol. Wine and spirits companies, for instance, may have stockpiled products in anticipation of tariffs due to their longer shelf life, unlike beer sellers.
Big beer brands heavily reliant on imported goods are at risk from Trump’s tariff approach. Constellation Brands, known for Mexican imports like Modelo and Corona, could face significant losses if consumer prices for these products exceed those of American-made alternatives.
Brown believes that tariffs alone will not deter consumers from alcohol consumption, as data suggests drinkers switch to lower-priced options during economic downturns. However, this shift may impact liquor stores less than consumer packaged goods companies.
“Retailers face minimal risk, as consumers can easily opt for a substitute if their preferred brand is affected by tariffs,” Brown explained. “While there may be some downgrading in product choices, companies like Constellation could still experience losses.”