When the economy takes a pause, American consumers don’t stop spending—they just spend differently. Historically, during recessions, people cling to their small luxuries, a phenomenon economists call the "lipstick effect." When big purchases like homes and cars feel out of reach, consumers turn to affordable indulgences—whether it’s a bottle of whiskey, a six-pack of beer, a lottery ticket, or a night out at the casino.
With current President Trump threatening a 200% tariff on European wines, Champagne, and spirits, the landscape of America’s favorite vices is about to shift. While inflation, interest rates, and general economic uncertainty have already made discretionary spending tighter, the alcohol tariff could have a ripple effect on everything from wine consumption to the rise of alternative industries like cannabis and sports betting. Let’s break it down.
What Happens to Vice Spending in a Recession?
Historically, consumers still spend money on alcohol, cigarettes, and entertainment even during economic downturns. The Great Recession (2008-2009) saw beer and liquor sales hold steady, and during the COVID-19 recession, alcohol consumption actually increased, especially at home. However, spending habits do change:
- Consumers trade down. Premium liquor and high-end wines take a hit while budget brands see a surge. Think fewer $50 bottles of Bordeaux and more boxed wine.
- Retail booze wins over bars. People swap out expensive nights at the bar for a cheaper six-pack or bottle of whiskey at home.
- Sin industries (gambling, tobacco, cannabis) thrive. When times get tough, people seek escapism, whether through gaming, vaping, or sports betting.
Now, with Trump’s proposed tariffs set to send European wine and spirits prices skyrocketing, we’re looking at a forced shift in consumer behavior—not just from economic anxiety, but from policy itself.
Who Gets Hurt? European Alcohol and High-End Wine Drinkers
A 200% tariff is no joke. If enacted, it could triple the cost of French Champagne, Italian wines, and Scottish whisky in the U.S. That means a $50 bottle of Veuve Clicquot could easily hit $150 or more at your local wine shop. For high-end wine lovers, collectors, and fine-dining establishments, this is a major blow.
Luxury European alcohol brands like LVMH (Moët & Chandon, Dom Pérignon), Pernod Ricard (Chivas Regal, Jameson), and Diageo (Johnnie Walker, Tanqueray) stand to suffer from a steep drop in American sales. Importers, distributors, and specialty retailers—Total Wine & More, high-end restaurants, and boutique liquor stores—will also feel the pain.
Who Benefits? U.S. Booze, Beer, and Cannabis
While European winemakers cry foul, American alcohol companies are licking their lips. U.S.-based wine and spirits producers will face less competition, making domestic brands like Duckhorn (NAPA), Brown-Forman (Jack Daniel’s), and Constellation Brands (Robert Mondavi, The Prisoner) the biggest winners. Domestic craft distilleries and wineries, particularly those in Napa Valley and Oregon, could see an increase in demand as consumers pivot to "Buy American."
Beer companies like American brewers also stand to gain, as drinkers look for cheaper alternatives to expensive imported wines. The same logic applies to cannabis stocks companies if wine is out of reach, some consumers might be more inclined to spend on legal weed, grandpa just cringed reading this…
Will Vice Spending Hold Up in 2025?
While the U.S. isn’t officially in a recession, economic uncertainty is looming, and tariffs on wine could amplify inflationary pressures in an already stretched consumer market. If the tariff goes into effect, expect a reshuffling of discretionary spending:
- More American whiskey and bourbon in place of European spirits
- Cheaper wines over high-end imports
- A possible surge in beer and cannabis consumption as alternatives
- Increased spending on gambling, sports betting, and tobacco as substitutes
A Different Approach: How Canada Taxes Sin Spending
Interestingly, Canada takes a different approach to vice consumption. The country imposes sin taxes on alcohol, tobacco, and cannabis, using the revenue to help fund public healthcare and other social programs. This policy creates a built-in economic buffer, ensuring that increased spending on vices contributes to future medical costs. The U.S., on the other hand, relies on state-level sin taxes but has no coordinated strategy to offset the public health burden that comes with increased alcohol and tobacco consumption.
Final Sip: A Forced Shift in Drinking Habits
American consumers have proven that they won’t stop indulging in their vices, even when money is tight. But if Trump’s tariffs go into effect, the way they indulge will change. European alcohol will become a luxury, and domestic booze, beer, and alternative industries like cannabis and gambling could see a boost.
The real question is: Will these tariffs hold? If history tells us anything, it’s that protectionist policies tend to have unintended consequences. For now, though, the smartest move might be stocking up on your favorite Champagne—while you still can.
Sources
https://apnews.com/article/trump-tariffs-wine-spirits-200-alcohol-dabead2d0e0fad64dc5e6250293ef016
https://www.bonappetit.com/story/trump-tariffs-wine-and-spirits-2025
https://www.thespiritsbusiness.com/2024/12/tequila-tariff-significant-headwind-for-wholesalers/
Evan R. Guido is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at https://finance.heraldtribune.com/category/ask-guido/. Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through an Avantax affiliated insurance agency. 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. The views and opinions presented in this article are those of Evan R. Guido and not of Avantax Wealth Management® or its subsidiaries. These opinions are based on Evan R. Guido observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 3/14/2025 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results. The S&P 500 is an index of 500 major, large-cap U.S. corporations. Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. You cannot invest directly in an index. An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. CDs are FDIC insured and offer a fixed rate of return. They do not necessarily protect against a rising cost of living. The FDIC insurance on CDs applies in case of insolvency of the bank, but does not protect market value. Other investments are not insured, and their principal and yield may fluctuate with market conditions. Investments are subject to market risks including the potential loss of principal invested. Neither diversification nor asset allocation assure or guarantee better performance and cannot eliminate the risk of investment losses. This information is intended to be educational and does not reflect any particular investment or investment needs of any specific investor. Aksala Wealth Advisors, LLC is not a registered broker/dealer or Registered Investment Advisory firm. Aksala Wealth Advisors, LLC and Avantax are not affiliated.