Alcohol Industry Dodges Worst of Trump’s Tariffs — For Now

(Bloomberg) — US alcohol companies breathed a sigh of relief after President Donald Trump’s tariff announcement turned out to be less damaging for them than feared.

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In a Rose Garden speech on Wednesday, dubbed “Liberation Day,” Trump unveiled sweeping new tariffs on major importing countries. But analysts said the alcohol industry avoided the worst-case scenario – particularly since imports from Mexico and Canada remain relatively unaffected. That means spirits like tequila and Canadian whisky can still enter the US tariff-free under existing trade agreements.

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This is a positive development for companies like Diageo, which sources just under half of its US portfolio from Mexico and Canada. The company’s product lineup includes Crown Royal Canadian whisky, its biggest brand in the US, and Don Julio tequila. Diageo’s shares closed Thursday down less than 1% in UK trading.

While many goods from Mexico and Canada remain exempt, imported canned beer and empty aluminum cans were hit with a separate 25% tariff, that may be extended to bottles and other formats as well, Bloomberg Intelligence analyst Kenneth Shea said. That directly affects companies like Constellation Brands Inc., which imports popular Mexican beers like Corona and Modelo Especial, Shea added. Constellation’s shares slipped less than 1% at 1:10 p.m. in New York while the S&P 500 index dropped about 4%. Constellation is scheduled to report fourth-quarter earnings on April 9.

During the tariff announcement, Trump made no reference to the previously floated 200% tariff on European wines and spirits — a threat that raised alarm among importers and sommeliers. The threat was in response to 50% tariffs on American whiskey imports by the European Union, which could be implemented as soon as mid-April if a deal between the EU and the US isn’t reached.

A 50% tariff “would weigh very heavily on the gross margins on Brown-Forman Corp. and MGP Ingredients, among other US whiskey exporters to that region,” Shea said.

“We are also concerned about retaliatory tariffs, especially from the EU, creating risk for export exposures,” Citi analysts led by Paul Lejuez said in a note on Thursday. Brown-Forman is the most exposed to EU exports of American whiskey, the note said. 

—With assistance from Sabah Meddings.

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