America’s favorite beer could become more expensive next year if Donald Trump implements his threatened trade tariffs.
The president-elect has pledged to impose 25 percent tariffs on America’s two largest trading partners, Mexico and Canada, on the first day of his presidency.
Modelo Especial Lager, which has overtaken Bud Light as the top-selling beer in the U.S., is imported from Mexico by parent company Constellation Brands.
If the full cost of the tariff were passed on to consumers, a six-pack of Modelo would rise from about $11 to $13.75. USA today reported.
Constellation Brands, which also owns Corona beer, saw its shares drop three percent following Trump’s tariff announcement.
And it’s not just beer that could rise in price if Trump follows through with his proposals.
Any alcoholic beverages imported from Mexico and Canada could have higher retail prices, Bump Williams, whose consulting firm serves the beverage industry, told USA Today.
Think of Mexican beer, but also tequila and Canadian whisky.
A six-pack of Modelo Especial Lager, the best-selling beer in the US, could rise from $11 to $13.75
A 750-milliliter bottle of tequila, which normally costs between $25 and $50, could cost between $31.25 and $62.50, according to the outlet.
A 750ml bottle of Canadian whiskey could rise from $40 to $50.
However, analyst Bill Kirk has estimated that Modelo maker Constellation may only need to raise beer prices by 12 percent to offset the proposed tariff and keep profits flat.
Kirk also argued in a note to investors at Roth MKM that Trump had threatened tariffs on Mexico earlier in 2019, but they never materialized as the threat set off trade talks.
Kirk said there is also a possible scenario in which Constellation, and therefore its beers, are exempted under any tariffs. Watching the market reported.
This comes as the U.S. Department of Justice requires Constellation to manufacture its brands exclusively in Mexico, a policy that stems from the previous sale of Modelo in 2013.
“We believe that it would be illogical to impose a tariff on the same U.S. company — the largest U.S. brewer — (for) which you obligate the manufacturing site,” Kirk told investors.
As the largest brewer in the U.S., the company’s success is tied to an estimated 2.37 million jobs in agriculture, distribution and retail.
Trump’s proposed tariffs could not only raise the cost of some alcoholic drinks but also drive up the price of many everyday goods, experts warn.
“Tariffs will drive up costs for American businesses and those costs will ultimately work their way into higher prices for shoppers,” retail expert Neil Saunders told DailyMail.com.
“If the rates are broad, there will be an impact on a wide range of categories,” GlobalData’s Saunders explains.
Trump has promised to impose 25 percent tariffs on Mexico and Canada
Constellation Brands, which also owns Corona, saw its shares drop three percent following Trump’s tariff announcement
Mexico is the US’s largest trading partner, importing $475 billion worth of goods from the country last year. The Washington Post reported.
The majority of these imports were manufactured items such as cars, computers and home appliances, which could increase in price under the proposed tariffs.
Mexico is also a major exporter of agricultural goods to the US.
Potential tariffs could also make everyday foods like fruits, vegetables, meat and dairy more expensive.
Earlier this week, Mexican President Claudia Sheinbaum said her country could retaliate with its own tariffs.
GlobalData’s Saunders added that retailers may be able to adjust to the tariffs – if such proposals are actually implemented.
“Over time, retailers and manufacturers will change where they make things, but implementing these changes cannot be done overnight,” he told DailyMail.com.
“The one point we should not forget is that President Trump is using the threat of tariffs as a negotiating tactic.
“So there is no guarantee that tariff policy will be as harsh as the rhetoric in the long term. Still, retailers must prepare for the worst.”
Trump made the trade threats on his Truth Social platform, claiming that tariffs would be used to stem the flow of drugs and immigrants into the United States.
“This tariff will remain in effect until drugs, especially Fentanyl, and all illegal aliens stop this invasion of our country!” he said of Mexico and Canada.