Trump’s Threat of 200% Alcohol Tariffs Shakes European Beverage Companies

A 200% tariff on all alcoholic products shipped from the European Union (EU) was threatened by U.S. President Trump, causing dissatisfaction among alcohol consumers, restaurateurs, bar owners, and suppliers across the U.S. A mutual trade agreement without tariffs between the EU and the U.S., existing since 1997, could be terminated due to Trump’s anger over a European tax on American bourbon. Taxes on ships and American-made motorcycles from ‘one of the most hostile and abusive tax and customs regimes in the world,’ as he described it in a Truth Social post, haven’t helped matters. The tariff threat has alarmed both alcohol manufacturers and consumers, with many seeking ways to mitigate the potential risk of a tax war with Trump. A 200% tariff would be catastrophic; Davide Campari-Milano estimates a 25% tariff would lead to losses between €50 million to €60 million. Analysts at Jefferies suggest a 200% tariff implies a hit of €444 million before any mitigating factors. Using similar calculations, Remy Cointreau faces damages of €543 million, Pernod Ricard an impact of €1.6 billion, and Diageo a blow of $1 billion. Experts expect some stockpiling of alcoholic beverages in anticipation of possible tariffs. While larger companies are prepared to adapt, distributors already hold high inventory levels, limiting their ability to increase stocks or ‘tie up’ capital in warehouses. Some EU-based wine importers secure bonded storage to delay higher duty payments if tariffs become policy. Bonded warehouses are government-certified storage facilities that allow customers to defer payment of duties on goods. Aner Snow, entrepreneur and managing advisor at Mana Wine, knows firsthand how popular ‘guaranteed wine’ has become. His broader storage and distribution business oversees 3.5 million square feet of secure warehouse space in New Jersey, hosting art, documents, and pathology samples. Serving residents of New York’s five boroughs, Long Island, and New Jersey, Snow mentions only one floor is dedicated to wine but plans to expand. ‘Demand for guaranteed wine has skyrocketed,’ said Snow, adding his company has received urgent requests from many wine importers seeking bonded status storage. Although Snow is optimistic about short-term demand, this could change within months if retailers hesitate to buy due to consumer demand uncertainty, potentially slowing imports. Production relocation isn’t simple; many beverages and wines produced outside the U.S. must be made in specific locations. Scotch whisky like Johnnie Walker can only be produced in Scotland, Irish liqueur Baileys in Ireland, and champagne only from the Champagne region in northeastern France. Global beverage producers already manufacture locally where possible; Diageo operates 11 production facilities in the U.S., producing brands like Captain Morgan rum and Balcones, a Texas whiskey. Vodka can be produced anywhere, but with U.S. vodka sales already affected by oversupply and tequila competition, brands are unlikely to invest in significant production moves. Companies might adopt cost-cutting measures such as local bottling or shipping liquid across borders, depending on tariff rules. Campari’s managing director, Simon Hunt, stated on March 5 that the company is considering expanding production in the U.S. Could alcoholic drinks become smaller but more expensive? During economic pressure periods, chocolate and chip producers, among others, shrink product packaging and strategically minimize costly ingredient use without reducing prices. As U.S. consumers cut spending, beverage producers promote smaller, cheaper bottles to boost sales, like Diageo’s 50ml Don Julio tequila bottles. Companies also extend into canned cocktails, enjoying higher profit margins per unit compared to bottled alcoholic drinks. Beverage companies could reduce costs using cheaper ingredients. What happens to U.S. wine collectors? Since imported wines hold a distinct place in the U.S. market, tariffs won’t necessarily drive consumers toward domestic products, according to Sharon Sevrens, sommelier and owner of Amanti Vino, with branches in Monclair and Morristown, New Jersey. Sevrens emphasized she has stockpiled and is ready to keep prices stable as long as possible if Trump enacts his threat. Importers have done the same. ‘Most of my importers—those who had the financial capability—have stored supplies. Some even brought forward an entire year’s expected supply, which is already in U.S. warehouses. It was an expensive move, but they deemed it necessary,’ she noted. However, once these supplies run out, price increases will be unavoidable.