Companies can only make and sell their products but sometimes governments get in the way and they have to react to the changes. President Trump has decide to impose tariffs on aluminum and steel in companies around the world. He may have a very good reason for doing so, but countries around the world can react to the costs. In the case of Mexico, they will add a 25% tariff on Tennessee whiskey which is not good for Brown-Forman Corp. The company makes Jack Daniel’s whiskey and Mexico is a growth market for them, the tariffs will add 25% to the costs which will likely slow down the growth.

In an article by Anne Riley Moffat and Justina Vasquez of Bloomberg News, Brown-Forman noted 5% of the company’s sales are in Mexico but growing at 15% a year. This is higher than the 7% growth in the US. As a large company Brown-Forman has other products including Herradura tequila.

One method to blunt the impact of tariffs is to build up inventories prior to the tariffs. In Europe the company has its own distribution system and inventory levels are up in Europe. In Mexico, it is trying to build inventories but does not own the distribution level. Tariffs will hurt no matter.

Linking to dividend paying stocks, all companies are based in a home country and sometimes it is the best thing under the sun and sometimes it is not. There are methods to deal with competition but when the government forces problems on your doorstep there are limited methods to deal with it. Hopefully the tariffs around the world are lowered.

There are more questions than answers, till the next time – to raising questions.