On Thursday, President Donald Trump issued a stark warning that he would impose a staggering 200% tariff on European alcoholic beverages. This drastic measure comes in retaliation to the European Union's (EU) recent 50% tariff on U.S. spirits, marking a significant escalation in a trade war that has the potential to spiral rapidly out of control.
In a post on Truth Social, Trump stated, “If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES.” He further emphasized that this move would benefit the U.S. wine and champagne businesses.
The quick succession of retaliatory measures within a mere 36 hours highlights how swiftly trade wars can escalate. Following the implementation of Trump's 25% tariffs on steel and aluminum, the EU reacted promptly, labeling the U.S. tariffs as “unjustified.” The EU's countermeasures will target approximately €26 billion ($28 billion) worth of American goods, including boats, bourbon, and motorbikes, with the tariffs set to go into effect in April.
The spirits industry in the U.S. is bracing for significant challenges due to these retaliatory tariffs. Industry representatives have voiced concerns about the impact of escalating trade tensions on their businesses, especially if further retaliation occurs. The swift exchange of tariffs showcases the potential for a damaging trade cycle.
In response to Trump's threats, French Trade Minister Laurent Saint-Martin criticized the U.S. administration, stating that, “Trump is escalating the trade war he has chosen to start.” He affirmed France's commitment to protect its industries and indicated that the country would “fight back.”
Olof Gill, a trade spokesperson for the EU Commission, called for the U.S. to revoke its steel and aluminum tariffs during a Thursday briefing. He stressed the importance of negotiation to avoid future tariffs, emphasizing that tariffs yield only lose-lose outcomes.
Alcoholic beverages represent a significant portion of the EU's exports to the U.S. In 2023, France exported nearly 27 million bottles of Champagne to the U.S., making it the top destination for this premium beverage after the United Kingdom. The escalating tariffs could severely impact this lucrative trade.
During an Oval Office meeting with Ireland's Taoiseach Micheál Martin, Trump hinted at further retaliation against the EU, stating, “Of course I will respond.” He labelled the EU as “one of the most hostile and abusive taxing and tariffing authorities in the World.” Trump criticized the EU's retaliatory tariff on U.S. bourbon as “nasty,” underlining the tense atmosphere surrounding international trade relations.
Despite resistance from Wall Street, Trump has indicated that he will not back down from his tariff plans, including additional reciprocal tariffs scheduled for April 2. This ongoing conflict raises concerns about a potential cycle of retaliation that could be difficult to resolve.
In light of the escalating situation, the U.S. spirits industry is urging for calm. Chris Swonger, CEO of the Distilled Spirits Council of the United States, stated, “We want toasts not tariffs.” He pointed out that the U.S.-EU spirits industry has historically operated under a model of fair and reciprocal trade, benefiting both sides.
Notably, much of the U.S. bourbon and whiskey production is concentrated in states that supported Trump, such as Kentucky and Tennessee. Retaliatory tariffs have already targeted American spirits, with Canadian retailers pulling American-made products from their shelves in response to Trump's trade actions.
Industry leaders, including Lawson Whiting, CEO of Brown-Forman (maker of Jack Daniel's), have expressed their disappointment with the tariffs and the adverse effects on U.S. spirits exports to EU countries. Whiting described the current tariff situation as “fluid,” indicating ongoing uncertainty for the industry.
Additionally, the Unione Italiana Vini, representing Italian winemakers, has predicted that Trump’s tariffs could lead to a staggering loss of €1 billion ($1.1 billion) for the industry. The ripple effects of this trade war could have long-lasting implications for both U.S. and EU economies.
