Beer and liquor are often considered recession-proof, but they’re not immune to the impact of tariffs. President-elect Donald Trump’s proposal to impose a 25% tariff on imports from Canada and Mexico could significantly impact some of America’s favorite alcoholic beverages, including the nation’s top-selling beer, Modelo.
Impact on Alcohol Prices
Industry experts warn that the proposed tariffs will raise costs for importers, leaving businesses with little choice but to pass on the additional expense to consumers. Dave Williams, president of Bump Williams Consulting, noted that even large players like Constellation Brands, the importer of Modelo, Corona, and Casa Noble tequila, could see a 16% cost surge. This would translate to a 4.5% increase in consumer prices, according to Wells Fargo equity analyst Chris Carey.
Preparation Underway
Some businesses, such as Meximodo, a tequila-focused restaurant in New Jersey, are already taking steps to mitigate potential impacts. Meximodo holds the Guinness World Record for the largest collection of tequila and agave-based spirits, boasting over 1,000 varieties. The restaurant’s parent company, Le Malt Hospitality Group, has embraced strategies like bulk purchasing and efficiency improvements to offset the financial burden.
“We’ve tripled our tequila order to prepare for potential price hikes,” said Saurabh Abrol, CEO of Le Malt, as the company ramps up inventory for its upcoming Meximodo Organic Blanco Tequila launch.
Economic Consequences
The U.S. imported $10.5 billion worth of beer and alcohol from Mexico in 2023, a 126% rise since 2017, according to the International Trade Administration. Canada, another key trade partner, contributed $543 million in alcohol exports last year.
Chris Swonger, CEO of the Distilled Spirits Council, highlighted the potential for retaliatory tariffs. “If the U.S. imposes tariffs, other governments typically respond with similar actions, affecting American-made exports like whiskey,” he explained.
Such retaliatory measures have hurt the industry before. Between 2018 and 2021, EU tariffs on American whiskey led to a 20% drop in exports. When these tariffs were lifted, exports surged to a record $2.2 billion in 2023.
Broader Challenges
Small breweries could also face indirect challenges. Katie Marisic of the Brewers Association warned that tariffs could raise costs for critical materials like Canadian malted barley and aluminum cans, squeezing profit margins for craft brewers.
“Even American-made beer isn’t fully insulated from these tariffs,” Marisic said.
What’s Next?
While the tariffs remain speculative, the alcohol industry is bracing for potential disruptions. Industry leaders hope for a resolution that avoids the worst-case scenario but are preparing for increased costs and operational challenges if tariffs are implemented.
