The distiller of Jack Daniel’s Tennessee whiskey is getting ready for the damage that Mexico’s penalizing tariffs could cause one of the company’s biggest growth markets. Mexico imposed a range of protectionist measures against the United States’ metal tariffs, including 20-25% tariffs on bourbon, which took effect on Tuesday, June 5th, 2018. Canada and European Union have also claimed to implement taxes on United States-made whiskey as part of their retribution against the 10% and 25% tariffs on their steel and aluminum exports. 5% of Brown-Forman Corporation’s total sales are in Mexico and the value of the market has been growing quickly. In the last quarter, sales were up 15% in Mexico, which is more than double the growth (7%) recorded in the U.S. To ease the impact of the tariffs on its exports, Brown-Forman began to build up its stock in markets outside the U.S. The company has increased its inventory levels in France, Germany, Spain, and Poland, but did not do the same for Mexico.
However, this company’s growth and sales are not entirely dependent on beverages made outside the country. It owns Jalisco-based Tequila Herradura, which has also contributed to its solid sales in Mexico. This country responded quickly after the U.S. announced that it would impose tariffs on its metal imports. The “equivalent measures” enforced target products produced by exporters in states that are politically important to the U.S. President Donald Trump and include pork, steel products and a range of fruits and cheeses. Mexico also announced that it would confront the tariffs at the World Trade Organization. This tariff disagreement has complicated the process to renegotiate the North American Free Trade Agreement, but both Mexico and Canada continue to sty devoted to reaching a new deal. However, Trump suggested that the U.S. could seek to negotiate separate trade accords with its two neighboring countries, which is very anticipating.