France's Cognac Makers Reel from Trump's Tariffs

Ladies and gentlemen, buckle up! The cognac industry in France is in the eye of a perfect storm, and it's not pretty. We're talking about a $3 billion industry that's been buffeted by trade wars, and now, Trump's tariffs have dealt a devastating blow. Let's dive in and see how this crisis is unfolding and what the cognac makers are doing to survive.



First, let's talk about the tariffs. Trump's decision to slap 20% tariffs on all European goods, including cognac, has sent shockwaves through the industry. This comes on top of the 20% tariffs already imposed by China on French spirits in October 2024. The result? Cognac sales to China, its second-largest market by volume, have plunged by more than half. And with the U.S. accounting for one out of every two bottles sold, Trump's tariffs have left many growers apprehensive.

Christophe Fillioux, the owner and master blender of the Jean Fillioux cognac house, has already torn out half a hectare of old vineyards and plans to uproot another hectare-and-a-half next year. He's not alone. Many growers are facing financial distress due to the decline in sales and the cancellation of grape supply contracts. Florent Morillon, president of the Bureau National Interprofessionnel du Cognac (BNIC), has warned that "the situation endangers the economy of the entire Cognac region. We are at the mercy of international trade disputes, and without urgent political intervention, the consequences will be devastating."

So, what are the cognac makers doing to adapt? They're exploring new markets, focusing on cost management, and calling for political intervention. Christophe Fillioux is working with distribution partners to expand into countries like Thailand, Vietnam, and Nigeria. But this strategy comes with its own set of challenges, including the need to build brand awareness and establish distribution networks in these new markets.

The industry is also working with banks to manage these situations and ensure the survival of the region's more than 4,000 growers. Florent Morillon has emphasized the need for a clear, decisive response from national and European leaders to mitigate the long-term damage to the industry.



But the long-term implications of the current trade disputes on the global demand for cognac are severe. The industry is already experiencing a sharp decline in exports to China, with sales plummeting by more than half since October 2024. This drop is attributed to Beijing's tariffs following the EU's levies on Chinese-made electric vehicles. The situation is exacerbated by the U.S. imposing 20% tariffs on all European goods, including cognac, which accounts for one out of every two bottles sold in the U.S. market.

The industry's reliance on international trade, with 97% of its production exported, makes it particularly vulnerable to these disruptions. The BNIC has already reduced the annual production limit for a third straight year, citing a "strongly deteriorated economic environment and an unprecedented drop in global consumption." This reduction in production is a direct response to the declining demand and the need to manage inventory levels in the face of uncertain market conditions.

So, what's the bottom line? The cognac industry is in crisis, and it's going to take a lot of work to turn things around. But with the right strategies and political intervention, there's hope for this iconic French industry. Stay tuned, folks, because this story is far from over.