Tequila and Mezcal Imports at Risk Due to Planned Tariffs

By Emma Rumney
LONDON (Reuters) – About $3 billion in tequila and mezcal imports from top producers Diageo and Jose Cuervo owner Becle could be jeopardized by U.S. President-elect Donald Trump’s proposed tariffs on Mexico, as indicated by Mexican customs data reviewed by Reuters.

Trump plans to impose 25% tariffs on imports from Mexico and Canada, along with additional duties on Chinese products. This could significantly increase the cost of importing spirits like tequila and mezcal, which are uniquely tied to Mexican production—akin to French champagne or Italian parmesan cheese.

Diageo, the world’s largest spirits manufacturer, and Becle, Mexico’s leading tequila producer, stand to be adversely affected, as tequila sales in the U.S. are vital for their growth.

Diageo shipped over 25 million liters of tequila to the U.S. last year, translating to approximately 33.7 million 750 ml bottles. The total value of U.S. tequila imports is estimated at nearly $1.6 billion, with Becle’s shipments valued similarly. In contrast, Campari Group, the next largest listed spirits maker with a tequila brand in the U.S., reported a far smaller sales value of $122 million.

Diageo commented on its experience with trade policy and expressed readiness to engage with the incoming administration on business matters. Becle has not provided comments.

Furthermore, the Distilled Spirits Council of the United States (DISCUS) noted that U.S. industry imports reached $4.6 billion in 2023, growing 160% since 2019, and warned that tariffs could lead to job losses. DISCUS plans to seek exemptions from proposed tariffs affecting all foreign goods.

Price Increases and Market Share Concerns

Diageo, which recorded sales of at least $483.4 million in Canadian whisky, faces additional exposure due to tariffs on Canadian imports. Alongside tequila, their Canadian whisky sales are crucial for business, which faces challenges as consumer demand shifts.

Cheaper tequila brands like Kendall Jenner’s 818 are gaining traction, while premium labels from Diageo are losing market share, indicating a consumer trend toward budget options.

According to Reuters analysis, a 25% tariff on $1.6 billion in sales could lead to a $400 million hit. Experts suggest price hikes could be necessary to counterbalance tariff impacts, potentially around 10% as forecasted by Jefferies analysts. However, increasing prices may also affect consumer behavior negatively.

In conclusion, the potential tariffs signify both a financial risk for top tequila and mezcal producers and a possible shift in consumer consumption patterns in the U.S.