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Pernod Ricard CFO warns Trump's border tax could cause inflation

The liquor industry is raising its glass to another strong year, as sales of spirits rose 2.4% to 220 million cases in 2016, according to the Distilled Spirits Council of the United States. But the celebration may not last for distillers importing goods into the country. If President Donald Trump’s proposal to tax companies selling their foreign-made goods stateside goes into effect, their sales could take a hit.

“We welcome any tax reform if it could boost economic growth in the country,” said Gilles Bogaert, chief financial officer of Pernod Ricard, in the video above. “Specifically on the [border] tax, we are skeptical because we are afraid it could lead to inflation as the tax is passed onto the consumer.”

It’s higher prices that Pernod Ricard, the world’s second-largest distiller, is worried about. Bogaert warned that passing along the tax to consumers and raising costs could deter potential customers from buying the company’s products. Pernod Ricard’s portfolio includes Jameson Irish Whiskey, Martell Cognac, and Absolut Vodka.

“We don’t locate production based on low labor costs of the country,” said Bogaert. “Jameson is coming from Ireland because it’s an Irish whiskey, Absolut is coming from Sweden, Martel is coming from France. We have a strong denomination of origin which is about the history of our brands… We believe this tax, if implemented, should not apply to spirits.”

Pernod Ricard recently reported first-half earnings that topped estimates, driven by continued growth in the U.S., a rise in sales of Jameson and a rebound in Asia. The Americas account for 29% of the company’s sales.