The liquor industry is bracing for a potential financial hit as trade tensions between the U.S. and the European Union escalate. Former President Donald Trump has threatened to impose a 200% tariff on European wines, champagnes, and spirits if the EU moves forward with its planned 50% tariff on American whiskey. The EU’s tariff, set to take effect on April 1, is a response to U.S. steel and aluminum tariffs, and if the situation worsens, it could cost some of the world’s largest liquor companies billions of dollars.
Liquor Giants at Risk
Two of the biggest names in the industry, Brown-Forman—the maker of Jack Daniel’s and Woodford Reserve—and Diageo—the company behind Johnnie Walker, Ketel One, and Tanqueray—are particularly vulnerable to these tariffs.
Brown-Forman, which generates about 20% of its revenue from the EU and UK, could see its earnings per share drop by $0.36 if the EU enforces its whiskey tariff, according to an analysis by Evercore. On top of that, the company gets 7% of its sales from Mexico and 1% from Canada—two countries that could also be impacted by additional trade restrictions. If a 25% tariff is applied to these regions, Brown-Forman’s earnings could take another $0.07 hit.
Diageo, which has been struggling financially in recent years, also faces serious consequences. Roughly 9% of its U.S. sales come from Scotch whisky, while Ketel One vodka and Tanqueray gin, both produced in Europe, account for another 5%. A 25% tariff on these products would reduce Diageo’s earnings per share by $0.04, while a full 200% tariff on European liquor could cut earnings by a massive $0.28.
Additionally, Diageo relies heavily on sales from Canada and Mexico, with about 45% of its U.S. revenue coming from these regions—mostly through Crown Royal whiskey and various tequila brands. The company may try to offset some of the financial impact by adjusting supply chains or raising prices, but analysts estimate it would still lose around $0.04 per share.
Implications for the Alcohol Market
The potential trade war isn’t just about tariffs—it could also lead to consumer boycotts and shifting drinking habits. Reports from Canada suggest that some consumers are already avoiding American-made alcohol in response to U.S. trade policies, and similar trends could emerge elsewhere.
Liquor makers may also struggle to pass the added costs onto customers, as the alcohol market is already dealing with pricing pressures. Higher prices on whiskey and spirits could push consumers toward alternatives like beer, which would not be as heavily affected by the tariffs.
Investors are already reacting to the uncertainty. Over the past three months, Brown-Forman’s stock has dropped 21%, while Diageo’s shares have declined by 17%. Meanwhile, beer companies appear to be in a better position. Anheuser-Busch InBev, the maker of Budweiser, has seen its stock rise 24% this year, while Boston Beer, the company behind Sam Adams, is up 4%.
Even non-alcoholic beverage companies like Coca-Cola and PepsiCo have performed better than liquor producers. Coca-Cola’s stock is up 11% in 2024, while PepsiCo has only seen a slight 2% decline.
With the April 1 deadline approaching, all eyes are on negotiations between the U.S. and EU. If both sides fail to reach an agreement, liquor makers could face major financial challenges, and consumers might feel the impact through higher prices at bars and liquor stores.
Also Read: Trump Warns of 200% Tariff on European Wine in Response to Proposed Whiskey Tariff
