Trump's tariffs compound the pain in France's cognac industry

Bangkok Post Group

U.S. President Donald Trump's decision this week to slap 20% tariffs on all European goods will compound the pain for France's $3 billion cognac industry, after it was targeted in October by Beijing. - REUTERS

Transcript

00:00Christophe Fiu walks through his family estate in the Cognac region of southwest France.

00:06It has survived for five generations, through wars and financial crises.

00:12But after the latest tariffs announced this week by US President Donald Trump, Fiu is

00:17starting to tear up some of the vines by the roots.

00:20With one out of every two bottles sold going to the US, Trump's tariffs have left many

00:26of the region's 4,000 growers apprehensive.

00:30France's Cognac industry exports roughly 97% of its production and has always been

00:35reliant on international trade, according to an economics professor at Bordeaux University.

00:41The US decision to slap 20% duties on all European goods comes after Beijing in October

00:46targeted the industry in retaliation for the European Union's tariffs on Chinese electric

00:52vehicles.

00:53The US is Cognac's largest market, followed by China.

00:58Since Beijing imposed trade measures, sales to China have plunged by half.

01:05Florent Morillon is the president of the BNIC, an industry body representing growers and

01:11Cognac houses, including LVMH-owned Hennessy and Rémy Cointreau's Rémy Martin.

01:18Cognac is more than 300 years old.

01:20We were happy to develop these two markets for decades, which were our two driving forces.

01:26And what you need to know is that historically, when one didn't do well, the other always

01:30did well.

01:31And it's never happened in the history of Cognac that both are not doing well at the

01:34same time.

01:38Cognac producers and suppliers, from bottling and packaging firms to the makers of barrels,

01:44cork and containers, employ roughly 70,000 people in the region.

01:49Some face an extra hit.

01:51Jerome Schmidt works as a general manager for a century-old oak barrel maker.

01:57We've already had one of our biggest customers telling us the same night that they're holding

02:01off on their orders to see how they will manage this additional tariff of around 20 percent.

02:08But even before trade tensions, Cognac sales to the US were faltering.

02:14Terrorist-based luxury consultancy MAD attributed the drop largely to aggressive price hikes

02:20in recent years, affecting middle-class consumers.

02:24In February, BNIC reduced the annual production limit for a third straight year to just half

02:29the levels of 2022, citing weakening demand.

02:33Cognac exports to the US last year were just over $1 billion.

02:38Things could still get worse.

02:41Trump has threatened 200% tariffs on European wine and spirits if Europe hits US bourbon

02:46with additional duties.

02:48Back at the FIU family estate, Christophe says the industry should focus on domestic sales.

02:58We should consume a little more in France and import a little less rum or whiskey, which

03:03isn't to say the quality of these products are bad.

03:06But if we could be a little more patriotic, it wouldn't be bad for Cognac and all the

03:10others.

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