By Doina Chiacu, Andy Sullivan and Philip Blenkinsop
WASHINGTON (Reuters) – U.S. President Donald Trump on Thursday threatened to slap a 200% tariff on wine, cognac and other alcohol imports from Europe, opening a new front in a global trade war that has roiled financial markets and raised recession fears.
Stocks fell on the news, as investors worried that Trump would enact stiffer trade barriers around the world’s largest consumer market.
Trump’s threat came in response to a European Union plan to impose tariffs on American whiskey and other products next month — which itself is a response to Trump’s 25% tariffs on steel and aluminum imports that took effect on Wednesday. The European Commission had no immediate comment on Trump’s post.
Canada, a neighbor and close ally that is the U.S.’ biggest aluminum provider, has also announced countermeasures of its own to Trump’s metals tariffs and has taken the dispute to the World Trade Organization.
Trump has threatened to impose an array of trade penalties since returning to the White House in January, though he has postponed action on many of them. At an Oval Office meeting with NATO Secretary-General Mark Rutte later on Thursday, he said he would not back off from reciprocal tariffs he has vowed to impose on all trading partners on April 2.
“We’ve been ripped off for years, and we’re not going to be ripped off,” he said.
Alcohol is shaping up to be a key friction point in the brewing trade war.
Some Canadian retailers have pulled American bourbon from their shelves as relations between the two countries have frayed and Trump has threatened to annex that country.
Many of the EU’s proposed countermeasures, worth 26 billion euros ($28.31 billion) in all, would apply to products that have little more than symbolic value, such as dental floss and bathrobes.
But the proposed 50% duty on U.S. bourbon would be a significant hit for the industry, which has seen exports grow steadily since the United States lifted tariffs Trump imposed during his first 2017-2021 term in office.
The EU accounted for roughly 40% of all spirits exports in 2023, according to the Distilled Spirits Council of the United States, a trade group.
Likewise, the United States accounts for 31% of EU wine and spirits exports, according to Eurostat.
Trump’s proposed 200% tax on European alcohol would create further headwinds for producers like Pernod Ricard, which has already cut its sales outlook due to Chinese duties imposed last year.
INDUSTRY CALLS FOR MORE TOASTS, FEWER TARIFFS
Industry officials on both sides of the Atlantic urged their leaders to de-escalate.
“This cycle of tit-for-tat retaliation must end now!” said spiritsEurope, an industry trade group.
Trump says tariffs are a crucial tool to revitalize U.S. industries that have withered due to decades of globalization, and he has stacked his administration with officials who line up with those views.
Treasury Secretary Scott Bessent said he was not worried about recent Wall Street volatility because the Trump administration is focused on a longer-term transformation of the U.S. economy.
He warned that the EU has more to lose in a trade war, as it relies more on exports to the United States.
“I would counsel these government leaders that they are on the losing side of this argument economically,” he said on CNBC.
Trump’s barrage of threats has spooked investors, businesses and consumers. Producers of jets, coffee, clothing, autos and packaged foods are among the many businesses scrambling to assess their operations as Trump’s actions threaten international supply chains.
Some economists say the uncertainty threatens the health of the U.S. economy and raises the risk of recession. A Reuters/Ipsos poll released on Wednesday found that 70% of Americans expect Trump’s tariffs to make regular purchases more expensive.
Trump said his alcohol tariffs would help domestic producers. But U.S. importers and distributors said it would lead to lost sales, layoffs and shuttered businesses.
Eric Faber, president of Cutting Edge Selections, a wine distributor in Cincinnati, said that U.S. wineries would not be able to fill the gap if Trump’s proposed tariffs rendered European wines unaffordable. The higher prices would also hurt restaurants and distributors that U.S. wineries rely on to reach customers, he said.
“It would be absolutely catastrophic,” he said.
(Reporting by Doina Chiacu and Andy Sullivan in Washington and Philip Blenkinsop in Brussels; Additional reporting by Susan Heavey, David Lawder, Steve Holland, Madeline Chambers, Dominique Patton, Emma Rumney and Tasiilo Hummel; Writing by Andy Sullivan; Editing by Louise Heavens, Bernadette Baum and Mark Porter)
