Mexican beer, Kentucky bourbon: Alcohol caught in the crosshairs of Trump tariff threats

A quickly evolving spat between the U.S. and its trading partners in Mexico and Canada has left alcohol producers on edge, with experts warning of potential price increases and other unique challenges for beer and spirits manufacturers.

A 25% tariff on Mexico and Canada on Monday was quickly walked back by President Donald Trump after the countries negotiated a 30-day delay. Despite the pause, experts and industry insiders are bracing for a trade war as Trump looks to leverage tariffs as a negotiation tool with other countries.

The beer industry — which relies heavily on imports from Mexico — would be particularly vulnerable if tariffs go into effect. Roughly 81% of U.S. beer imports came from Mexico in 2023, according to Statista data.

Constellation, which owns Mexican beer brands such as Corona, Modelo and Pacifico, could also see a hit to its best-selling brews. Mexican imports make up roughly 85% of Constellation’s revenues, according to a note from Michael Lavery, a senior research analyst at Piper Sandler.

The challenge for Constellation would be balancing price increases without providing a boon to competitors like Anheuser-Busch and Molson Coors, which produce their beer in the U.S., Lavery said. CEO Bill Newlands told investors last month Constellation would change its approach based on how the tariffs situation plays out. Constellation did not respond to a request for comment.

While consumers have more options to switch between beer brands, there are fewer ​​​​​​choices in spirits because the industry is more tied to location. Kentucky bourbon, Mexican tequila and other iconic alcohol associated with countries or regions are among the products most at risk of tariffs.

Following Trump's tariff threats, Canadian Prime Minister Justin Trudeau responded with the prospect of retaliatory duties on spirits produced in Republican-voting states.

“It's a very clear implication that the iconic American brands like spirits, like a bourbon from Kentucky, are going to be targeted and singled out because of their American iconic status,” said Tom Madrecki, vice president of supply chain resiliency at the Consumer Brands Association.

The geographical factor

While the U.S. sees tariffs as a way to spur domestic manufacturing, many producers can't simply move their base of operations. In many cases, their location is paramount to why they are successful products in the first place, according to Spiros Malandrakis, the head alcohol researcher at Euromonitor.

Regulatory constraints also add more complications. Under Mexican law, tequila can only be produced in the state of Jalisco from the region’s agave. In the U.S., Kentucky bourbon is tied to the state because of its unique weather conditions that give the drink its flavor.

“Consumers on both sides are … wanting both of those products because they are different, and so it just ends up driving up the cost for everyone,” Madrecki said.

Alcohol producers could attempt to recreate some region-specific products, Malandrakis said, but this risks alienating consumers in the process.

“You lose part of the brand identity and the reasons why consumers buy alcohol if you are forced to produce it in an entirely different place,” Malandrakis said.

Still, due to the chaotic and unpredictable nature of trade wars, Malandrakis warned domestic producers of alcohol against seeing the tariffs as a benefit to their businesses. Broad tariffs, he said, could also depress alcohol spending altogether if inflation leads to lower cash flow overall.

“I don’t see producers of craft domestic beer or California wines capitalizing when people have less money in their pockets,” Malandrakis added.