Trump's Tariffs To Tank Tequila
The owner of a famous cocktail bar in Dallas warns that tariffs on Mexican imports will mean higher menu prices and reduced availability of specialty tequila.
By next summer, your favorite margarita could cost a few bucks more—and might taste different too.
That's because President Donald Trump's threatened tariffs on imports from Mexico will increase prices and could reduce the availability of some tequilas and mezcals, says Gabe Sanchez, owner of the Black Swan Saloon, a legendary cocktail bar in Dallas.
"It's going to be a very difficult conversation for us to have with people when they come in," Sanchez told Reason in an interview last week. While his customers might be used to $15 cocktails, Sanchez says tariffs could potentially push menu prices "much higher." (Sanchez' favorite drink right now is called "True Romance," and he was gracious enough to share the recipe, which you can find at the end of this article.)
Trump has threatened to slap new 25 percent tariffs on all goods from Canada and Mexico, and he said on Inauguration Day that those tariffs could hit as soon as February 1. The Wall Street Journal reported on Sunday that those tariffs could be announced before the end of the week. The Journal framed that coming move "the first salvos in a multifront trade war."
All wars have casualties, and tequila figures to be among them. All authentic tequila comes from Mexico, and even though there are some small craft makers of agave-based liquors in the United States, imports are and will remain essential to meet Americans' demand for the drink.
"It's like French wines. They only come from France. You know, scotch whiskey only comes from Scotland. You can't substitute [tequila] for something else," says Sanchez.
(Mezcal is a broader category that includes many spirits made from agave, while tequila is a subset made specifically from Blue Weber Agave. It's similar to how bourbon is a subset of whiskey, produced in a specific place and manner.)
That means someone along the supply chain will have to pay the cost of the tariff. Sanchez says he doesn't like the idea of raising prices on the patrons at his bar but sees little alternative.
One of Sanchez's to-go varieties of mezcal is available from a distributor at $35 per liter right now, he says. If the full cost of a 25 percent tariff gets passed down the supply chain, menu prices will have to increase, or certain drinks will have to disappear.
"If that jumps to $42 [per liter], we can't make it. We can't put those in cocktails anymore," Sanchez explains. To stay competitive with other bars in the area, he knows he can't price cocktails much higher than about $15 apiece. "If it jumps at that high, we just can't sell it anymore. You know, somebody is not going to buy a $20 or $22 plus tax mezcal cocktail."
Tequila and other agave-based spirits account for 13 percent of the total U.S. alcoholic beverage market by volume and 22 percent of the market by revenue, according to data from the Wine and Spirit Wholesalers of America (WSWA), which is warning that tariffs on Mexican imports would fall heavily on consumers and businesses. Those tariffs could endanger as many as 14,000 American jobs and up to $2.5 billion in lost U.S. output, according to an economic study commissioned by the WSWA.
"Any new tariffs on wine and spirits in today's economic climate would be extremely disruptive," Dina Opici, chairwoman and president of the WSWA, said in a statement last week. "The entire industry—from suppliers to importers to distributors to retailers—is under immense pressure, with little room to absorb or distribute the cost of additional tariffs."
Even the largest brands would take a hit. Reuters reported in December that Trump's planned 25 percent tariff on Mexican imports would be a big blow to companies like Diageo, which owns brands including Don Julio and Casamigos, and Becle, the Mexico-based brand that is the world's largest tequila producer. Those companies "rely heavily on tequila sales in the U.S. for growth," according to Reuters.
Sanchez also worried about losing access to certain specialty varieties of mezcal and tequila—the sorts of rare bottles that make cocktail culture in Texas unique. With an added 25 percent tariff on exports to the U.S., some small-batch producers might fear their products would be uncompetitive in the American market and simply choose to sell those limited supplies elsewhere, he says.
When he's not slinging drinks behind the bar of the Black Swan—and not helping his 8-year-old build a new pinewood derby race car, which is this week's parenting task, he tells me—Sanchez also works as a consultant for new bars in the Dallas area. That might be the most frustrating part of his job at the moment, given the uncertainty in American trade policy.
"I've told them all…we're going to have to trash some of these menus," he says. "And, you know, especially in North Texas, where a cocktail menu might have 25 percent, 30 percent in agave spirits," he says, "I'm telling them the menus are going to be different. The offerings are going to be different. Hold on to what you got for a little while."
True Romance:
- 1.5 ounces of mezcal
- 0.75 ounce of yellow Chartreuse
- 0.5 ounce of Amaro Averna
- A small spoonful of local Texas honey
- Combine ingredients, stir, and serve over a big cube of ice.
"A little sweet, a little bitter," is how Sanchez describes it. "It'll knock your socks off."
