Trump Targets Mexico, Canada For 25% Tariffs On Day One
November 26, 2024Products from key U.S. trading partners Mexico and Canada are set to come under 25% tariffs, with President-elect Trump declaring on Truth Social that he will order the move on his first day in office. The steep levies could have significant repercussions for the U.S. spirits market, where Tequila has been driving growth in recent years, and could also cut into the long-term upswing for Mexican beer.
Trump said the planned tariffs are intended to pressure the two countries to stem the flow of migrants and drugs across their borders into the U.S. Some observers pointed out that the threatened tariffs could violate the USMCA free trade agreement covering North America that Trump signed in 2020. The president-elect also previewed additional 10% tariffs on Chinese goods.
The planned tariffs will mean Tequila and Canadian whisky producers will face the unpalatable decision of whether to hike prices to offset lost margins or accept slimmer profits to maintain market share.
While Tequila’s U.S. growth has recently slowed to single-digits, on their current growth trajectory agave-based spirits are expected to surpass vodka for the first time and become the industry’s largest category in dollar value terms by sometime next year, according to Impact Databank. Tequila volume in the U.S. has more than doubled to 31 million cases since 2015.
The growth surge in Mexican beer—led by Constellation’s portfolio of Modelo Especial, Corona, and others—could also be impacted. Modelo Especial has averaged annual growth of 15% in the U.S. over the past decade, approaching 200 million (2.25-gallon) cases, according to Impact Databank. Constellation’s investment plans call for pouring $3 billion into its operations south of the border through fiscal 2028, including with a third brewery site in Veracruz.—Daniel Marsteller
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