U.S. President Donald Trump has reignited trade tensions with the European Union, threatening to impose a 200% tariff on wine, cognac, and other European alcoholic beverages. The move comes in response to the EU’s plans to slap tariffs on American whiskey and other products next month, further escalating a global trade war that has rattled financial markets and raised concerns of a potential economic downturn.
Trump’s threat follows the implementation of his administration’s 25% tariffs on steel and aluminum imports earlier this week. In retaliation, the European Commission proposed countermeasures worth €26 billion ($28.31 billion), including a 50% tariff on U.S. bourbon. The EU accounted for roughly 40% of American spirits exports in 2023, making it a crucial market for U.S. distillers. Similarly, the U.S. is a key destination for European alcohol, accounting for 31% of EU wine and spirits exports.
The proposed tariffs have sent shockwaves through industries on both sides of the Atlantic. U.S. beverage companies saw stock gains on the news, anticipating a competitive advantage, but the broader market took a hit as investors braced for potential supply chain disruptions. Canadian retailers have already begun pulling American bourbon off their shelves in response to rising trade tensions, reflecting a growing impact on international commerce.
Industry leaders are urging de-escalation, warning that ongoing tariff battles will harm businesses and consumers alike. “This cycle of tit-for-tat retaliation must end now!” said spiritsEurope, a trade association representing European alcohol producers.
Economists caution that heightened trade barriers could push up prices and slow economic growth. A recent Reuters/Ipsos poll found that 70% of Americans expect Trump’s tariffs to lead to higher consumer costs. However, Trump remains steadfast, arguing that tariffs are necessary to rebuild U.S. manufacturing and reduce reliance on foreign imports.
Treasury Secretary Scott Bessent defended the administration’s stance, asserting that the EU stands to lose more in a trade war given its reliance on exports to the U.S. “They are on the losing side of this argument economically,” he said in an interview with CNBC.
As tensions mount, businesses and investors are left navigating an increasingly uncertain economic landscape.
