Trump threatens 200% tariff on alcohol from EU

U.S. President Donald Trump has threatened to impose tariffs of up to 200% on all alcoholic beverages from the European Union (EU), marking a new twist in the escalating trade war. This move is in response to the EU's planned 50% import tax on American whiskey, which itself was retaliation for Trump's tariffs on all steel and aluminum imported into the United States. The potential impact on the global alcohol market is significant.

President Trump has called for the immediate cancellation of the EU's "terrible" tariffs on American whiskey, stating that the EU bloc is "hostile and insulting" and "formed for the sole purpose of taking advantage of the U.S." He accused the EU of using trade to harm American interests, justifying his tough trade protectionist measures. The President's rhetoric highlights the deep divisions in trade policy.

A European Commission spokesperson stated that the U.S. and EU are "preparing for a call" to discuss the current situation. The spokesperson confirmed that EU Trade Commissioner Maroš Šefčovič has "been in touch with his U.S. counterpart" following Trump's latest threat. Both sides are attempting to find a way to resolve the trade dispute through communication, aiming to prevent further escalation. Diplomatic efforts are underway to de-escalate the conflict.

This stalemate marks a renewed escalation of the trade war, which has already disrupted financial markets and raised concerns about the economic and consumer impact on countries around the world, including the United States. Europe exports more than 4.5 billion euros (approximately $4.89 billion; £3.78 billion) of wine to the U.S. annually, making the U.S. its largest export market. The potential tariffs could severely impact this trade relationship.

Ignacio Sánchez Recarte, Secretary General of the Comité Européen des Entreprises Vins, the European wine industry association, said that if Trump carries out his threat, it would destroy the market and lead to the loss of thousands of jobs. "There are no other alternatives to sell all of this wine," he said, pleading with both sides to "keep wine out of this dispute." The wine industry is urging for a peaceful resolution to protect livelihoods.

Meanwhile, the new U.S. tariffs on steel and aluminum went into effect on Wednesday, imposing a blanket 25% tariff on metal imports and ending the U.S.'s previous tariff exemptions for shipments from some countries, including the EU and Canada. Canada and Europe, among the U.S.'s largest trading partners, called the new tariffs unjustified and imposed their own tariffs on a range of American products. The EU's measures are set to take effect on April 1st. These retaliatory tariffs are escalating the trade tensions.

This conflict echoes a dispute that occurred during Trump's first term, when he first announced tariffs on steel and aluminum. The EU responded with its own tariffs, including a 25% tax on American whiskey. According to the Distilled Spirits Council of the United States, whiskey sales to the EU have since fallen by 20%, from approximately $552 million in 2018 to $440 million in 2021. Trump later lifted the tariffs after the two sides reached a deal exempting certain quantities of European metal from tariffs. The previous trade dispute serves as a cautionary tale.

Trump wrote on social media: "If those Tariffs aren’t immediately removed, America will be taxing European wines, champagnes and alcoholic products at 200%!" This statement underscores the President's firm stance and willingness to impose significant tariffs. The threat has sent shockwaves through the alcohol industry.

Mary Taylor, an American wine importer, said the measures would be disastrous for her business and the industry, with effects rippling through American restaurants, bars, and distributors. "This looks like a huge threat to our livelihoods," she said. Taylor, who imports 2 million bottles of wine annually, responded to Trump's 25% tariffs on certain EU wines during his first term by expanding her sales in Europe, but she said, "200% is something else entirely." The potential economic impact is substantial.

U.S. stock markets fell again on Thursday. The S&P 500 fell nearly 1.4%, about 10% below its recent peak, a milestone known as a correction. The Dow Jones Industrial Average fell 1.3%, and the Nasdaq fell nearly 2%. In Europe, London's FTSE 100 was flat, while Germany's DAX closed down about 0.5%. In Paris, the CAC 40 fell 0.6%, with shares in major spirits makers taking a hit, Pernod Ricard down 4% and Hennessy cognac maker LVMH down 1.1%. The financial markets are reacting negatively to the trade tensions.

In interviews with U.S. business media on Thursday, White House officials accused the EU of escalating the dispute. Commerce Secretary Howard Lutnick told Bloomberg Television, "Why are the Europeans picking on Kentucky bourbon or Harley Davidson motorcycles? It's disrespectful." Treasury Secretary Scott Bessent warned that a trade war could inflict more economic pain on the EU than on the U.S., dismissing concerns that the conflict could spiral out of control. The U.S. is placing blame on the EU for the escalating tensions.

European Central Bank President Christine Lagarde told the BBC's HARDtalk that the EU had "no choice" but to retaliate. "At the moment, everybody is posturing," she said, adding that she expected the two sides to sit down and negotiate. She warned that if the dispute developed into a full-blown trade war, "everybody would suffer." There is hope for negotiation, but the potential consequences are severe.

So far, Trump has shown little tolerance for retaliation from other countries against the tariffs he has imposed. Earlier this week, he threatened to impose 50% tariffs on Canadian steel and aluminum after Ontario, Canada, responded to the new tariffs with a surcharge on electricity exports to the U.S. He dropped the threat after Ontario agreed to suspend the charge. Trump's past actions indicate a willingness to use tariffs aggressively.

Former Trump adviser Stephen Moore, now an economist at the Heritage Foundation, said he believed the EU would have to make concessions to defuse the situation, noting that Trump has consistently expressed concerns about agricultural rules. "It will absolutely end in a deal," he said. "It's just a question, if it ends in a deal in a day, a week, a month, or six months, but it will ultimately be a negotiated settlement." There is optimism that a resolution can be reached through negotiation and compromise.