Trump May Help China Get Hooked on Tequila

June 9, 2017: Originally published in Vice Money.

During his campaign, Donald Trump gave off the impression that he perhaps had some issues with Mexico and Mexicans — calling them rapists and bad hombres, or suggesting people with Mexican heritage couldn’t be trusted as U.S. judges, or insisting that there needed to be a gigantic wall erected between Mexico and the U.S.

Then soon after Trump became president, his administration floated an idea for a 20 percent tax on Mexican imports to pay for the wall. After Trump suggested in a January tweet that Mexico’s unwillingness to pay for the barrier made an upcoming meeting between the two countries pointless, Mexican President Enrique Peña Nieto went ahead and canceled his visit to Washington.

The tax on Mexican imports never materialized, but Trump’s anti-Mexico rhetoric and his notorious unpredictability have given new urgency to an old problem vexing Mexico’s tequila makers: Finding a large export market that isn’t the U.S.

Of the 196.7 million liters of tequila that Mexico exported in 2016, 160.9 million liters, or 82 percent, went to America, according to data from Mexico’s Tequila Regulating Council. Germany was a distant second with 2.7 percent of total exports.

“No one knows what’s going to happen [between Mexico and the U.S.],” said John Tichenor, global brand director at Tequila Herradura. “We have a wait-and-see attitude. Where’s it going to net out?”

While they’re waiting and seeing, tequila makers have their sights set on one gigantic alternative: China, the world’s second-largest economy and a top consumer of booze — though not of tequila, at least not yet. But the market would appear primed for more spirits; according to a 2014 World Health Organization study of Chinese drinking patterns, 69 percent of Chinese alcohol consumption consisted of spirits, while beer made up 28 percent and wine notched 3 percent.

Just how big is the Chinese market? The country’s national spirit, baijiu, is little known in the West — yet the vodka-like grain-based alcohol is the world’s best-selling spirit. In 2015, the Wall Street Journal reported that baijiu generated $23 billion in sales annually.

Still, even in a massive nation of enthusiastic spirits drinkers, tequila faces an uphill battle.

“When the Chinese see [tequila], we tell them it’s made from agave and that it’s coming from Mexico,” said Francisco Soltero, director of strategic planning at Patron Spirits. “Sometimes they say, ‘Where is Mexico? Is that a state in the United States?’”

In addition to overcoming a lack of familiarity with tequila — and even with Mexico — makers say they must also contend with Chinese regulations that have tended to keep the best tequilas out of the country. In 2008, China set methanol levels for imports that allowed lower-quality 51 percent agave tequilas to enter, but forbade premium 100 percent agave tequilas. (Methanol is produced as part of the distillation process.)

China modified its rules in 2013 and now allows some 100 percent agave tequila into the country, giving tequila makers hope that China could someday be a much more significant market.

“China has big potential,” Soltero said. “They are willing to try new spirits. They like to drink. Our experience, because we’ve had some business trips to China, is when they try tequila, they love it.”