President Trump’s threatened tariffs on Mexico is hitting the country’s tequila industry hard – even though the promised 25% levy has yet to go into effect.
Major tequila producers and retailers have acquired massive stockpiles of the agave-based spirit, which can only be made in Mexico, have paid hefty storage fees; and put hiring and product launches on hold, according to a Reuters report.
All of these strategies have the potential to backfire if Trump walks back his tariffs pledge, which is currently on a second 30-day pause.
“No matter what happens…a price has been paid,” said Mike Novy, chief executive officer of Calabasas Beverage Company, which operates Kendall Jenner’s 818 Tequila brand.
Calabasas, for example, asked its distillery to put workers on overtime shifts through the holidays in December so it could deliver six months’ worth of tequila to the US before the tariffs took effect, Novy said.
Those additional work hours raised the cost the company has paid to avoid tariffs to $2 million, with the added storage fees tacking on 10% to this cost, he added.
Brian Rosen, founder of InvestBev, an investor that partners with early-stage spirits brands, said tequila companies in his portfolio also built up six-month supplies – and are paying $20,000 for each extra storage container.
Companies could be tempted to raise their prices and pass the cost of the storage fees onto the consumer – so even if Trump’s tariffs on Mexico are scrapped, shoppers could see higher prices for tequila, Rosen said.
Diageo and Becle, two of the largest tequila producers, previously assured investors they stockpiled their inventory ahead of the tariffs.
The two companies did not immediately respond to The Post’s requests for comment.
Mexican restaurants, who lean heavily on their popular margaritas, will also feel the heat if tariffs are scrapped and they’re stuck with oversize inventory.
La Contenta Oeste, a Mexican restaurant in New York, has ordered 120 cases of tequila and 80 cases of mezcal since January – about six months’ supply, owner and chef Luis Arce Mota said.
He typically only buys 20 cases at a time.
If Trump shelves the tariffs, “I’m going to have a lot of tequila,” he said.
Drinkers have done the same. Richard Paige, a communications professional in Indianapolis with a taste for tequila, said he had made sure his selection was stocked for at least a few months.
Such behavior could make for a “very quiet” second quarter for the big tequila producers, said Trevor Stirling, analyst at Bernstein.
In Mexico, meanwhile, representatives of tequila brands and industry bodies said companies will look to new markets – signs of shifts in investment that could make the U.S. tequila sector less vibrant, 818’s Novy said.
“It’s already happening,” he continued. “If (tariffs) are permanent, then the outcome is just magnified.”
With Post wires
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