How Trump’s tariffs on cognac hit a French success story

For the last decade, owners of cognac distilleries have seen their sales more than double to the United States, making their spirit one of France's fastest-growing major exports. Then Donald Trump came along.

How Trump's tariffs on cognac hit a French success story
Visitors attend a cognac tasting in Hennessy's tasting room in Cognac, southwestern France, on February 9th 2018. Photo: AFP

While the French are small-time drinkers of cognac, Americans consume almost one in two bottles produced in the vineyards north of Bordeaux thanks in part to the alcohol being promoted by US rappers as a symbol of wealth and luxury.

And while millionaires like Snoop Dogg and Jay-Z will still be able to afford their beloved “yak”, many other Americans might find it out of reach after US import tariffs of 25 percent come into force on Tuesday.

The US “is a fast-developing and priority market for our industry, which is even showing growth this year despite the impact of Covid-19,” the director general of the BNIC cognac industry body, Raphael Delpech, told AFP.

A producer smells a barrel of ageing cognac in Domaine Marcadier-Barbot in Segonzac, southwestern France. Photo: AFP

The tariffs were confirmed by the Trump administration on New Year's Eve, marking the latest trade salvo from the outgoing US president and a further escalation of a long-running transatlantic feud.

Cognac, which is to be taxed along with other grape-based spirits from France and Germany, is a collateral victim of a dispute between Washington and Europe over subsidies given to their commercial plane makers, Boeing and Airbus.

European wines, cheeses and olive oils have been subjected to 25-percent import duties in the US since October 2019, while Europe has hit products from American orange juice to ketchup with its own measures.

“All French wines and spirits, not only cognac, are now being affected by diplomatic tensions that have nothing to do with us,” Delpech lamented.

FEVS, a French exporters' association, has estimated that the wine and spirit sector could lose more than €1 billion ($1.2 billion) a year in US sales due to the tariffs unless incoming president Joe Biden reverses them.

Cognac bottles. Photo: AFP

'Sipping Remy'

The trade spat has exposed the extent to which the centuries-old cognac houses of the Charente region have become dependent on American thirst for their products, some of which retail for hundreds of dollars.

The prospect of long-term tariffs has revived memories of the only major downturn the industry has known in the last 20 years during the 2008-2009 global financial crisis.

Explosive growth since then – exports to the US have doubled to over 100 million bottles a year – has been fuelled by the unlikely marriage of conservative cognac dynasties in their turreted chateaus to the flashy world of US hip hop.

Cigar-puffing Jay Z rapped about “sipping Remy on the rocks with my crew” in his 1996 hit “Can't Knock The Hustle”, while Busta Rhymes released “Pass The Courvoisier II” in 2001, a landmark moment for the industry.

Since then, major brands like Remy Martin, Hennessy, Courvoisier, Martell or Louis XIII have piled in on the commercial opportunities, forging partnerships with performers from Pharrell Williams, Nas, A$AP Ferg, to Quavo.

While favoured neat by rappers, cognac is also popular and widely drunk in cocktails by Americans.

Delpech says the industry has built “a very strong link with American consumers stage by stage over decades, by investing enormously.”

Short-term pain?

Jean-Pierre Cointreau, head of the high-end Maison Frapin cognac house, says he believes stocks in the US are high enough so that consumers will not see an immediate impact on prices.

And he hopes that the incoming Biden administration, which includes many francophile figures including the next secretary of state Antony Blinken, will work to reverse the tariffs. 

“I tend to think that the French and American governments are committed to sorting out this problem,” he told AFP.

His company also has strong links in Asia, particularly in China, where cognac also benefits from its association with France's reputation for luxury.

“It's making this period very complicated,” Cointreau said of the US tariffs, adding that bar and restaurant closures due to Covid-19 shutdowns, plus a reduction in duty-free and airline sales, were hitting the whole industry.

“There's an accumulation of problems that are very regrettable.”

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Warning: 6 of the most common scams in France to watch out for

From computer hacking to phone calls, a new report reveals that scams and frauds are unfortunately on the rise in France and the criminals are getting more sophisticated - here are some of the most common frauds to be aware of.

Warning: 6 of the most common scams in France to watch out for

France’s fraud and financial crime watchdog, Tracfin, has published its annual report, indicating that fraudulent activity has become both more frequent and more evolved in the last year.

The report highlighted the most significant forms of fraud tracked by the watchdog. In particular, it found that CPF (Compte Personnel de Formation) scams represented a significant proportion of the fraudulent activity registered this year. 

These are the scams the report highlighted:

The CPF scam: The Compte Personnel de Formation is available to all employees in France. Essentially, they are given access to money each year for free professional training (€800 for unskilled workers, €500 for full-time, skilled workers).

This is a real, government-backed scheme with a genuine website and app – it’s particularly useful for foreigners in France because the money can be used for French classes. Here’s how it works.

Unfortunately, however, the name is frequently used by scammers and Tracfin director Guillaume Valette-Valla warned that these scams have become more professional, often now involving transnational criminal organisations, particularly those located outside the EU, as well as shell companies that exist to siphon off the public money.

A lot of these scams involve SMS messages and phone calls warning people that they would lose their allowance and urging them to sign up to training courses have become increasingly frequent. These messages often contain fraudulent links asking recipients to enter their personal details onto dodgy websites.

The presence of CPF shell companies dramatically increased in 2021, according to the report. Tracfin received 116 reports of suspicion of shell companies, which is a significant increase from the 10 reported in 2020. 

For CPF fraud overall, the scams racked in accounted for over €43.2 million compared to €7.8 million a year earlier.

READ MORE: Beyond the scams: How to use France’s €500 training budget

The carte vitale scam – if you live in France your carte vitale is a vital document, allowing you to access publicly funded healthcare.

An increasingly common scam is sending a text message or email telling a person that their carte vitale is about to expire, and to click on the link and enter their details to keep it active. This is a scam, the carte vitale does not expire. If you need to make any changes to your card or request a new one if you have lost of stolen it, use your online Ameli account or visit your local CPAM office.

Driving scams – summer is the time of year when thousands of people – both locals and tourists – take to the roads for a trip away, and scammers often prey on drivers.

Some scammers operate at service stations, approaching non-French drivers and spinning them a sob story to try and extort money, while others operate insurance scams by pretending that you have damaged their car. There are also sporadic reports of ‘fake cops’ who try to issue on-the-spot cash fines to cars with foreign number plates.

Driving in France: The common scams thieves try on foreign motorists

Postal scams – it’s a very common experience to get a message from La Poste or a parcel courier telling you that you were out when they tried to deliver a package. Usually you will just need to arrange another time or head to the post office, but beware of text messages or emails telling you that there are outstanding charges for a parcel, with a link to enter your card details.

Couriers do not operate like this and if there are any outstanding postage or customs charges, you pay them in person not via a link in an email or SMS.

Ransomware attacks – France also saw a rise in ransomware attacks – particularly those targeting small businesses.

In 2021, the French National Agency for Information Systems Security (ANSSI) handled 203 ransomware attacks, compared to 192 in 2020 and 69 in 2019. This represents an increase of 194 percent increase in incidents handled in two years. These attacks were predominantly (over 52 percent) targeted at very small, small and medium-sized businesses.

Ransomware attacks are on the rise for two reasons: a lack of digital literacy and security, and an increased specialisation and professionalisation of the criminal ecosystem.

Fraud on government schemes: Tracfin also noted a rise in fraudulent declarations for government schemes, particularly those made available as emergency responses to the Covid-19 crisis.

These were mostly represented by misuse of compensation for short-time work, emergency aid for companies, self-employed people and business owners, and state-guaranteed loans.

Looking forward – the report also warned how NFTs (Non-fungible tokens) could constitute an additional fraud and cybersecurity risk for people across the country.

So far, Tracfin has received reports of scams involving NFTs whose value has been artificially increased (“pump and dump”), NFTs copying or plagiarizing original works without having the copyright or simply fake NFTs that disappear once they are downloaded from a fraudulent website. The watchdog also highlighted that NFTs could eventually be used for tax fraud. 

On top of tracking scams within France, Tracfin was also involved in tracking down the assets of Russian oligarchs after sanctions against Moscow went into place following the invasion of Ukraine, estimating that €1.18 billion worth of financial and non-financial assets have been frozen in France since the beginning of the conflict.

If you are contacted by a company and you are not sure if it is genuine, the French government has compiled a ‘blacklist’ of dodgy companies that frequently try and defraud people – you can find it here.

If you think you may have fallen victim to a scam, particularly if you have shared your banking information, the first step is to contact your bank. You can learn more about what to do in this scenario, HERE