Americans love Mexican booze. Will they get a tariff hangover?

The economies of the United States and Mexico are more intertwined than they’ve ever been. So are their drinking habits. With the threat of tariffs on the table but postponed for now, beer drinkers’ wallets hang in the balance.

President Trump and Mexican President Claudia Sheinbaum said Monday that they’d reached an agreement to postpone 25% tariffs on Mexican goods for at least a month while they work to hash out a deal. That caused many stocks to claw back their losses from the morning, when investors were having a mini freak-out over tariffs. (My colleague, Luke Kawa, has an excellent, highly sophisticated visual that aptly explains this complex geopolitical phenomenon and its impact on financial markets.)

While the tariffs were averted for now, uncertainty lingers. The US auto sector, for example, is highly integrated with Mexico and Canada, and many of Americans’ favorite foods, like avocados and mangoes, come from Mexico. But few stocks illustrate the concern that came over Wall Street and pub owners on Monday better than Constellation Brands, which sells Modelo, Corona, and Pacifico in the US. Its share price fell by more than 7% at market open, only to regain most of those losses by the afternoon.

An important reminder on how tariffs work: in Constellation’s case, it would be charged by the US government a 25% fee on kegs and cases of Modelo it brings from Mexico to sell in the US. Like any increased cost, it’s typically passed on to consumers in the form of higher prices. Mexico has also threatened its own tariffs, which would be charged by the Mexican government on American barley that’s imported into Mexico to brew Modelo beer.

That does not mean consumer prices will increase by 25%. The looming threat of tariffs has decreased the value of the Mexican peso and Canadian loonie against the US dollar, which softens the blow for US importers. Also, beer served this month and next is likely already purchased: most distributors for Constellation Brands and Heineken — which sells Dos Equis and Tecate — took on 90 to 120 days of inventory, said Bump Williams, a beer industry consultant.

Williams estimated that a 25% tariff would result in a 5% to 7% increase in the price for consumers. That would mean a $12 six-pack would cost about $12.84.

“I have faith that the Trump administration will dial back the tariff percentage on beer when he sees how many blue- and white-collar voters he’s impacting with an ‘I win, you lose’ position,” Williams said. “After all, he proclaimed to be a man of the people, by the people, and for the people.”

How did we get here?

Grupo Modelo was bought by AB InBev, the largest brewer in the world, in 2012. But after an antitrust lawsuit from the Obama administration, AB InBev agreed to sell the rights to distribute Modelo and its sister brands in the US. It was bought by Constellation, which at the time didn’t have any beer in its portfolio.

Soon after, American consumers’ palates quickly shifted to prefer Mexican beers, and free-trade agreements kept it affordable. By 2023, Modelo Especial beat Bud Light as the most sold beer in the US. And even as Americans are drinking less beer, imports of Mexican brews keep going up.

Constellation has by far been the biggest beneficiary of this shift. The company’s beer segment brought in $8 billion in revenue in 2023, compared to $3.5 billion in 2015.

Mexican liquors (tequila and mezcal, for the most part) have also grown in popularity in the US, though the beneficiaries are more fragmented than in beer.

Becle SA, which makes Jose Cuervo, is majority family-owned. Diageo bought Don Julio in 2014 and Casamigos in 2017. Bacardi acquired Patrón in 2018. And there’s no shortage of celebrity tequila brands.