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Drinks firms await result of US election
In five weeks’ time America’s voters will decide who will occupy the White House until 2029. What might the different outcomes mean for the drinks trade? Ron Emler reports.
The outcome of the US election will have a large influence on the trend of the world economy and especially on the American consumer and their relationship with alcohol.
American drinkers have taken a step back over the past 18 months, resisting price rises and trading down in the face of inflation and pressure on wallets.
Nobody is willing to predict the result, the candidates are neck and neck and much could change in the run up to 5 November.
Each presidential candidate has a much differing view of economic policy. Harris is expected to continue President Biden’s largely liberal, internationalist approach and Trump is pumping his ‘Make American Great Again’ platform, which on his past record would involve more isolationism and tariff barriers.
The problem for Harris is that in a recent poll more than half of the American electorate think the economy has shrunk under President Biden and that unemployment is at a 50-year high.
Yet under Biden, unemployment has remained below 4% for the longest stretch in more than 50 years, and 15 million jobs have been created. Inflation has fallen from its 9% Covid-induced high to 3%.
Extra duties on imports
Harris has yet to generate a “feel-good” factor and perception is everything to voters so businesses are considering what a second term for Trump might mean, especially if he carries out his threat to slap extra duties of 20% on imports deemed to affect American industries.
The engine of growth at Constellation Brands has been its Mexican brewed-beers, Modelo and Corona, but chief executive Bill Newlands is relaxed.
In an interview with CNBC last week he said: “First of all, assuming there was a Trump administration, we already had four years of a Trump administration, and our business was up double-digits during that window of time.
“Two, we have a fair amount of our inputs that come from the United States and then are made into beer in Mexico. I highly doubt any perspective on tariffs would really be around: How do you hurt the American farmer?”
“These are authentic Mexican beers,” he said. “Guess what? You have to make them in Mexico.”
The EU penalised Bourbon in retaliation for US tariffs on aluminium. Trump could turn the tables and target Scotch and Cognac in favour of Bourbon and American whiskey if a cause celebre emerged.
Meanwhile, the threat of Chinese penalties looms over Cognac as Beijing considers its response to last week’s raising by Brussels of tariff barriers on China-made electric vehicles and components.
Nobody is sounding alarm bells about potential global trade wars under Trump but the precedents are causing quiet anxiety. Everybody is waiting until 5 November, many with fingers crossed
However, the previously glacial progress towards a free trade agreement between Britain and India is said to be gaining a little pace.
With national elections in both countries out of the way, sources in UK Government hint that the returned Modi government is eager to talk through the differences (largely about student visa and residency rights) and make progress. The ball, they hint, is in Kier Starmer’s court to formulate Britain’s formal policies.
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