Alcohol industry scrambles to avoid being caught in looming trade war

Alcohol suppliers and trade bodies are fighting to prevent the industry being caught in the crossfire of looming trade wars between the US and its key trading partners.

Following a week in which tensions threatened to boil over between US President Donald Trump and the EU, the industry is seeking resolutions to prevent widespread levies being imposed on both imports into, and exports out of, its most important global market.

Trump’s threat to impose 200% tariffs on EU alcohol imports into the US would hit suppliers of champagne, cognac and Irish whiskey hard, as these products enjoy protected geographic status and cannot be produced in the US.

The Bureau National Interprofessionnel du Cognac has therefore called on the EU to remove US whiskey from its list of goods subject to tariffs from April.

“The European Commission has made diplomatic decisions on issues unrelated to us, yet we are the ones suffering the consequences,” the BNIC said.

Canadian whiskey and tequila producers face similar headaches if Trump moves forward with threats to introduce 25% levies on products from Canada and Mexico.

Diageo – which owns tequila brands Don Julio and Casamigos, Canadian whiskey Crown Royal, and US bourbon Bulleit – has proposed tightening rules around protected geographical status as an alternative to tariffs.

In a letter to the US trade representative last week, Diageo executive Alden Schacher suggested plants or grains used in the production of imported alcohol could be required to be sourced either in the US, or from the territory of a strategic trade partner such as Mexico or Canada.

Rules could also be tightened to ensure distillation also occurred in the US or in the territory of the trading partner, whilst barrels used for ageing could also be required to be sourced from one of those places, Schacher said.

Such moves would “deepen US supply chains, disincentivise the use of non-originating content” and help grow jobs and the economy in the US, he added.

Even if a reprieve is secured, however, the threat of tariffs has already had a significant impact on strategic decisions made by alcohol suppliers in recent months.

In November, Diageo announced it was pausing construction of its new £132m Crown Royal distillery in Canada. Pernod Ricard has halted Irish whiskey production at its Midleton distillery for a period of three months, as opposed to its typical one-month annual shutdown.

Meanwhile, tequila suppliers including Becle, Pernod Ricard, Diageo and Kendall Jenner’s 818 Tequila have all front-loaded the US market with inventory in anticipation of tariffs, adding to shipping and storage costs.