French Cognac Industry Faces Deepening Crisis Amid U.S. Tariffs and Global Downturn:

The French cognac industry, worth nearly $3 billion, is facing one of its toughest challenges in decades. New 20% tariffs imposed by U.S. President Donald Trump on European goods have intensified the economic strain on cognac producers already hit by falling global demand and retaliatory tariffs from China.

In October, China, the second-largest cognac market by volume, imposed duties in response to European tariffs on Chinese electric vehicles. As a result, cognac exports to China have dropped over 50%.

The United States, accounting for 50% of global cognac sales, is also under threat of additional 200% tariffs, should the EU retaliate against U.S. bourbon exports.

Growers Uprooting Vineyards Amid Declining Sales

Producers like Christophe Fillioux, who manages the Jean Fillioux estate founded in 1894, have already begun uprooting vineyards. Fillioux removed half a hectare last year and plans to uproot another hectare-and-a-half in 2025, citing the industry's “huge visibility problem.”

Despite these setbacks, Fillioux considers himself fortunate. He owns his brand, carries little debt, and is less dependent on large houses like Hennessy, Remy Martin, and Martell.

Global Slowdown and Overproduction Post-Pandemic

The current crisis follows a period of rapid expansion during the COVID-19 pandemic, when rising demand led producers to plant more vineyards. Since then, sales have slowed, leaving over 4,000 growers in the region burdened by debt and overcapacity.

BNIC (Bureau National Interprofessionnel du Cognac), the industry’s governing body, has reduced production limits for the third consecutive year, cutting quotas to half of 2022 levels to match reduced global demand.

Employment Impact and Contract Cuts

The region’s 70,000 workers—including bottlers, cork producers, and barrel makers—are facing layoffs and contract reductions. Some, like Tonnellerie Vicard, a leading barrel maker, are already seeing U.S. customers cancel or reduce orders.

Jerome Schmitt, Vicard’s GM, said, “Clients are adjusting orders overnight based on tariff forecasts.”

Historical Ties and Cultural Shifts in U.S. Market

Historically, cognac found a loyal consumer base in the Black community in the U.S., a connection dating back to World War II. This relationship deepened in the 1990s with Hennessy’s urban marketing campaigns, and continued with partnerships like Jay-Z’s Cognac d’Ussé and Hennessy’s NBA sponsorship.

But experts like Thomas Mesmin of MAD consultancy warn that younger consumers are turning to other spirits such as tequila and whiskey, with rising cognac prices pushing away middle-income buyers.

Export Dependency and Future Uncertainty

With 97% of its production exported, the cognac industry remains highly vulnerable to geopolitical shifts. Bertrand Blancheton, economics professor at Bordeaux University, notes that cognac’s global nature has been both a strength and a liability since its inception in the 17th century.

Producers Consider Scaling Down or Exiting

Growers like Pascale Dupuy, 67, are already cutting back. Facing a 40% drop in expected revenue after Remy Martin halved its contract and Hennessy likely to follow, Dupuy says he will distill less and sell more grapes for bulk wine.

His daughter is uninterested in taking over the business, leading Dupuy to believe he may be the last in his family to produce cognac.

“You start questioning if it’s still worth it,” he said.