President-elect Donald Trump promised to impose 25% tariffs on all imported goods from Mexico and Canada and an additional 10% tariff on products from China beginning January 20, his first day in office.
Trump pledged in a Truth Social social media post on Monday evening to file executive orders to implement the tariffs, citing the flow of undocumented immigrants and drugs into the U.S. as the impetus behind the planned move.
“Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price,” he wrote.
Tariffs placed on foreign countries are paid first by the company importing the goods into the U.S., which then has the option to eat the cost, pass on a portion of the cost to consumers or pass the full costs onto the consumer.
Within the beer industry, all eyes are on Constellation Brands, importer of popular Mexican brands Modelo, Corona, Pacifico and Victoria. Constellation, as part of its acquisition of those brands from Anheuser-Busch InBev, is required by consent decree to produce Modelo and Corona in Mexico and has invested billions in its brewing operations south of the border.
Nik Modi, RBC Capital co-head of global consumer and retail research, outlined the potential impacts of Trump tariffs on Constellation’s beer business. He noted that Constellation has been through a first Trump presidential term, and threatened tariffs never came to fruition.
Modi also cited Constellation’s “better relationships with key political figures today” and floated the idea of a potential carve out that would exclude the Mexican beer importer from tariffs.
Writing for VinePair, Dave Infante explored Constellation’s campaign contributions during the 2024 cycle and found that the company donated the most money of any major bev-alc company with a political action committee (PAC) during the cycle, with the majority going to Republican candidates.
Modi also pointed to Constellation sourcing ingredients in the U.S. and shipping them to Mexico for beer products. Tariffs on incoming products “would directly impact key farming-heavy Midwest states that Trump won in the election,” Modi wrote.
Additionally, Constellation is exploring “cost-saving initiatives and selective pricing,” with the company believing it “has ample pricing power to price above its normal +1-2% if the company needs to in a sweat-case scenario.”
Modi added that Constellation’s “consumer base has shifted more mainstream” and people who might be “deported are most likely to be in the lower-income strata that STZ has less exposure [to] relative to other beer brands, given the premium positioning of its brands.”
Nevertheless, more than half of Modelo consumers are Hispanic.
As of press time, Constellation’s stock (STZ) has declined around -4%, hovering in the $231 to $232 range. The 52-week high for the stock is $274.87.
Constellation Brands is the second-largest beer category vendor year-to-date (YTD) through November 3 in off-premise retailers tracked by market research firm Circana, with dollar sales exceeding $7.655 billion (+6.4%) and volume growing +5.3%.
Modelo Especial is the top-selling beer in off-premise retailers YTD, with sales in excess of $3.7 billion (+9%) and volume increasing +8.4%.
Corona Extra is the fifth best-selling beer in off-premise retailers YTD, with $2.1 billion in sales (+0.4%) but volume declining -1.4%.
The Distilled Spirits Council (DISCUS) was among the first beverage-alcohol industry trade groups to respond to Trump’s vow for tariffs on Mexico and Canada.
DISCUS wrote that the spirits industry “has been weighed down by retaliatory tariffs as part of unrelated trade disputes since 2018, which crashed our exports harming thousands of distillers and their farmers across the United States.”
The trade group continued: “We are now currently facing the threat of a devastating 50% tariff on American whiskey by the EU at the end of March 2025. Imposing a tariff on tequila and Canadian whisky from two of our largest trading partners could kick off more retaliatory tariffs on American spirits to Canada and Mexico.
“Under the United States-Mexico-Canada Agreement (USMCA), tequila and Canadian whisky are designated as distinctive products, similar to bourbon, where they can only be made in their country of origin. Slapping a tariff on tequila and Canadian whisky will not boost American jobs simply because they cannot be produced in the United States.”
DISCUS added that tariffs imposed upon spirits from Canada and Mexico “are going to hurt U.S. consumers and lead to job losses across the U.S. hospitality industry just as these businesses continue their long recovery from the pandemic.”