Cognac producers feel the heat from ‘double whammy’ China-U.S. tariffs

Leading French cognac maker Rémy Martin, part of the Cointreau group has put a majority of its 390-strong workforce on part-time working as a direct result of a ‘double whammy' of tariff hikes by China and the U.S. These two countries account for around 80% of the company’s sales.

Since October last year, European brandy exports to China – French cognac makers account for the lion’s share - have faced retaliatory tariffs in response to an EU move to increase taxes on the import of Chinese electric vehicles which were imposed due to claims of that China was unfairly subsidizing its car industry.

In February, the French cognac industry reported that it was losing €50 million monthly due to China’s ‘anti-dumping’ duties and appealed for government support.

As for the U.S., while President Trump has not carried through his threat to slap a surtax of 200% on wines and spirits, all European goods imported into the U.S. are now hit with an extra 10% duty.

Two-thirds of Rémy Martin’s staff are being sidelined one week out of each month until at least June at the Merpins bottling plant in the Charente region, a labor union official told French media. This works out at a monthly pay cut of 7%. It is also uncertain whether the many temporary staff that the company usually employs will be hired.

Cointreau has declined to comment.

To a backdrop of sliding sales in the first six months of the year, particularly in cognac, last week, Conitreau’s CEO Eric Vallat resigned after five years at the helm. His successor has yet to be appointed.

However, the beginning of the month did bring some good news for French cognac makers who were braced for a definitive application of the Chinese import tariffs at a rate of 34-39% from April 5.

France’s foreign minister, Jean-Noel Barrot, during a recent visit to China, secured a reprieve delaying additional customs duties for three months. "This is a significant first step towards resolving this dispute," he said.

Ahead of Barrot’s visit, industry body, the Bureau National Interprofessionnel du Cognac, said it had called for the application of customs duties to be postponed until 5 July, and then for French prime minister François Bayrou to travel to China "to settle the problem once and for all."

Trump Tariffs

The French wine and spirits industry as a whole is having to navigate through an uncertain period due to the Trump administration’s on/off tariffs policy.

Sales in the US, the premier market for French wines and spirits, reached €3.8 billion in 2024, with nearly €800 million for champagne. This represents a quarter of French alcohol exports and almost half of US imports of European wines and spirits.

At the start of the month, French wine and spirits exporters group FEVS, said it was expecting its members' sales to decline by at least 20% in the U.S. but this forecast pre-dated Trump’s announcement dropping new tariff rates on imports from most U.S. trade partners to 10% for 90 days to allow trade negotiations with those countries.

The industry saw its exports fall globally for the second consecutive year in 2024 due to threats of U.S. tariffs, a less dynamic Chinese market, and a downward trend in prices.