US President Donald Trump’s tariff on imports from Canada and Mexico is expected to kick in tomorrow, with fears it will rock the tequila industry.
The tariffs were originally scheduled to take effect on February 4, but the US Government paused them for at least 30 days to allow time for negotiation.
In a post on X following a phone call with US President Donald Trump, Canadian Prime Minister Justin Trudeau said: “Canada is implementing our $1.3 billion border plan – reinforcing the border with new choppers, technology and personnel, enhanced co-ordination with our American partners, and increased resources to stop the flow of fentanyl.”
However, the US President remains unhappy with the measures put in place by his neighbours.
Commerce Secretary Howard Lutnick said the situation is “fluid” and President Trump will determine the levels.
“There are going to be tariffs on Tuesday on Mexico and Canada,” Lutnick told Fox News’ Maria Bartiromo on Sunday Morning Futures.
“Exactly what they are, we’re going to leave that for the president and his team to negotiate.”
That’s bad news for spirits that can only be produced in their country of origin, such as Mexican tequila and Canadian whiskey. Tequila makers shipped 32 million litres of the spirit to the US in January.
“It’s a pivotal moment for tequila,” Vas Art, head of marketing at OhBev, a Vancouver-based agency focused on alcoholic beverages, told Bloomberg.
“We’re seeing a frenzy of proactive moves. Brands are front-loading like crazy,” stockpiling in the US and in some cases even importing stainless steel tanks of the liquor for it to be bottled stateside.”
Jose Cuervo maker Becle’s Chief financial officer Rodrigo de la Maza told analysts during an earnings call that a tariff on tequila would come at a huge price.
“We estimate the impact of these tariffs to be approximately US$80 million in 2025 assuming no mitigating actions through pricing, operational efficiencies or currency effect,” he said.
Following the initial announcement about the tariffs Constellation Brands’ share price fell 6.2%, Diageo went down 3.5% and Brown-Forman lost 2.5%.
Diageo has about 46% exposure to imports from Mexico and Canada, according to a Jefferies note. The brokerage firm expects fiscal 2025 forecast to be revised when the company reports on Tuesday.
Pernod Ricard has production sites in Canada, Mexico and China with about 6.3% of its sales from Mexico and Canada imports, according to Jefferies.
Tequila sold in the US accounts for 7% of Campari group’s sales and has been a key driver to its performance in the country, according to J.P. Morgan.
J.P. Morgan noted that about 85% of Constellation Brands’ consolidated sales are derived from Mexican beer and could potentially see a mid-20’s percentage impact to earnings.
A tariff on tequila would be damaging for Brown-Forman, with its tequila portfolio accounting for a mid-single digit percentage of US sales, according to J.P. Morgan.
Brown-Froman is also subject to retaliatory tariffs from Canada and Mexico, with its American whiskey portfolio a particular concern.
The alcohol industry was also hit by tariffs during Trump’s last trade war from 2018 to 2023.
This time around the Distilled Spirits Council of the United States urged President Trump to reconsider tariffs, cautioning that they could hurt the US industry and lead to retaliatory actions.
President and CEO Chris Swonger said: “Tariffs on spirits products from Canada and Mexico will jeopardize the industry’s contribution to the US economy. The North American spirits sector is highly interconnected and, as a result, tariffs on Tequila and Canadian whisky will harm US spirits companies that have these products in their brand portfolios.
“American spirits consumers as well as restaurants and bars across our country that are still struggling following the pandemic closures will shoulder the burden of these tariffs. Tequila, Mezcal and Canadian Whisky are rooted in geographical traditions and local craftsmanship that complement, rather than compete with, US distilled spirits brands.
“We are concerned that Canadian stores may take US spirits products off their shelves again and also fear that American whiskey will become entangled in a new round of retaliatory tariffs.
“The Distilled Spirits Council, Tequila Chamber and Spirits Canada are committed to working collaboratively with all stakeholders to explore solutions that prevent tariffs on distilled spirits. Maintaining tariff free access for all distilled spirits is crucial for supporting jobs and shared growth across North America.”
American alcohol pulled from shelves in Canada
Following the initial tariff announcement, multiple Canadian provinces announced they were removing American alcohol from sale in their regions in response to Trump’s tariff on Canadian goods.
Among them was Manitoba Liquor and Lotteries (MBLL), a corporation owned by the government, which was told to stop ordering alcoholic products from the US and pull American products off the shelves of liquor stores
Manitoba Premier Wab Kinew said: “Trump’s tariff tax is an attack on Canadians.
“We’re stopping the sale of American products at Manitoba liquor marts.
“How you choose to spend your money is one of the most important decisions you as a consumer can make.
“There are plenty of great Manitoba breweries and distilleries to support instead.”
Ontario Premier Doug Ford wrote in a post on X: “Every year, LCBO sells nearly $1 billion worth of American wine, beer, spirits and seltzers. Not anymore.”
Drinks industry begs Trump to reconsider tariffs