Cognac producers in southwestern France are facing mounting economic pressure as a wave of new U.S. tariffs deepens the challenges already posed by declining global demand and earlier Chinese trade retaliation.
The latest blow came with U.S. President Donald Trump’s decision to impose a 20% tariff on all European goods, including French cognac, a move that threatens the backbone of France’s nearly $3 billion spirits export industry. The United States remains the largest market for cognac, accounting for roughly half of global sales.
Producers like Christophe Fillioux, whose family-owned estate has operated for five generations, are now making difficult decisions. He recently uprooted sections of his vineyard and plans to remove more next year as part of a broader industry-wide response aimed at adjusting to the downturn. “The future is very uncertain. It’s hard to plan anything right now,” said Fillioux, standing in a vineyard planted by his father in 1980.
This comes as the region’s growers were already reeling from Chinese tariffs imposed in retaliation for EU duties on electric vehicles. Shipments to China, the second-largest cognac market by volume, have dropped by over 50% since last October.
The situation may worsen: Trump has floated the possibility of further tariffs of up to 200% on European wine and spirits, escalating tensions amid the ongoing trade disputes.
Global Slump and Overcapacity
The current crisis is exacerbated by an earlier expansion in production during the post-pandemic boom, when global demand for luxury goods spiked. Many growers invested heavily, often through loans, to meet the anticipated surge. Today, many of those same producers are struggling under debt as sales decline.
Industry body BNIC (Bureau National Interprofessionnel du Cognac) has responded by cutting production limits for the third consecutive year — now just half of 2022 levels — citing a “dramatically weakened” global economic climate. “We’re doing our best to manage the fallout with banks and local governments,” said BNIC President Florent Morillon, acknowledging that external factors beyond the control of producers have triggered the crisis.
In the Cognac region, the industry — from vineyard workers to barrel-makers — supports around 70,000 jobs, many of which are now at risk. Layoffs have begun, and local leaders warn of rising unemployment.
Changing Tastes, Rising Costs
Even before the latest tariffs, cognac’s popularity in the U.S. was beginning to wane due to price hikes and changing consumer preferences. While the U.S. remains a key market, especially for mid-range bottles priced between $36–$60, analysts note that American drinkers are increasingly shifting toward alternatives like tequila and whiskey. “Cognac hasn’t expanded beyond niche demographics in the U.S.,” said Thomas Mesmin, a Paris-based luxury industry consultant. “The big brands still rely on a few core cities and loyal customer bases.”
Still, the cultural connection between cognac and the U.S. — particularly its historic popularity among Black American communities and high-profile partnerships in entertainment and sports — has helped maintain visibility in the market. But experts warn that brands may struggle to absorb the tariff cost without losing customers. “Even a $1 or $2 price increase could cause disruption in today’s environment,” Morillon said.
Fourth-generation grower Pascale Dupuy, 67, said he expects his income to fall by 40% this year after major buyers like Remy Martin slashed contracts. His daughter has shown little interest in continuing the family business, raising concerns about the long-term future of small, independent cognac estates. “It’s just one more problem in a growing list,” he said. “I don’t know if it’s worth continuing anymore.”
As producers explore new markets in Asia and Africa to offset losses, many remain uncertain about how long the downturn will last or whether the industry can recover from the combined shocks of tariffs, shifting demand, and overproduction.