President Donald Trump on Thursday threatened to impose a 200% tariff on alcohol from the European Union in response to the region’s 50% retaliation on US whiskey, further escalating tensions between the two long-time trading partners.
Trump also sharpened his rhetoric towards the EU. For decades, this has been one of the closest allies in the United States.
“The European Union, one of the world’s most hostile and abusive tax and customs authorities founded for the sole purpose of using the United States, has just made 50% tariffs on whiskey awkward,” writes Trump of the True Society. “If this tariff is not removed immediately, the US will soon place a 200% tariff on all wines, champagne and alcoholic products representing France and the other EU. This is perfect for the US wine and champagne business.”
A spokesperson for the European Commission said the region’s trade minister had already contacted US counterparts and “a phone call has been prepared.”
Late Thursday morning, Trump posted: “There is no free trade in the United States. We have ‘silly trade’. The whole world is tearing us apart!!!”
After some early turnovers on Thursday morning, the US major stock indexes settled firmly in the red, with the S&P 500 down nearly 10% from its February history high. The high-tech NASDAQ index has fallen by 1.4%, and is currently down more than 14% from the height of IS February.
The US is the world’s largest importer of both wine, champagne and sparkling wine, with the former having annual sales of $4.9 billion and the latter having over $1.7 billion. Meanwhile, US wine exports rank around $1 billion in the fifth place in all countries, while sparkling wine exports are only $67 million and 12th in the world.
The impact of the tariffs on The-for-Tat has been heavier than those manufacturers of US consumers relying on importing goods.
In a statement, the US Distillation Spirits Council, representing the alcohol maker here, called on Trump to agree with the EU over a deadlock, noting that liquor from either region has not been subject to tariffs for decades.
“We are urging President Trump to secure a spiritual agreement with the EU, returning to zero-to-zero tariffs, which will create jobs for the US and increase the production and exports of the US hospitality sector.
Trump exerted tariff threats on his stubborn US partners, making it a central practice in his early second administration. The latest volley shows that despite protests from economists and business groups over the impact of such policies, he has no plans to stop him from doing so. Trump’s biggest tariff regime — targeting all steel and aluminum imports into the United States — came into effect Wednesday. In response, the EU and Canada announced they would impose retaliatory obligations on US products.
Trump has repeatedly suggested that the US’s massive trade deficit and the rest of the world are signs of weakness. He acknowledged that his tariff strategy could lead to a period of “transition” in the US economy. This has shown signs of wobbling in recent weeks, but he said it will eventually appear stronger.
On Thursday morning, Commerce Secretary Howard Lutnick added additional context to Trump’s latest Barb and the EU, which is a particularly target of the EU from states that strongly support Trump.
“The president was totally bothered by the fact that Europeans did this, so you’ll hear a response from someone who cares emotionally about America,” he said on Bloomberg television. “He cares about America and wants to look after Americans. And why do Europeans choose Kentucky bourbon… Harley Davidson motorcycle? That’s rude.”
Ratnic added that Trump was considering “balancing” trade ties with the EU.
“We are your biggest, most important trading partner. Let’s treat us with respect and balance it a little,” he said.
Ernst Buscher, a spokesman for the German Wine Institute, said in an interview that 200% tariffs would be a “catastrophe,” and that the US is the most important export market for German winemakers, accounting for around a sixth of exports.
He added that when a 25% tariff was placed on German wine during the first Trump administration, importers and winemakers shared the cost of protecting US consumers from price increases, but that’s not possible with a 200% tariff.
French trade minister Laurent Saint-Martin said in a statement Thursday that Trump was “escalating the trade war he chose to launch.”
“France is determined to fight against the European Commission and our partners,” he said. “We don’t succumb to the threat and always protect our industry.”
So far, the market response to Trump’s approach has been widely negative. Key stock indexes erased post-election profits as investors rebel against the prospects of higher costs. On Thursday, stock futures fell quickly in response to Trump’s latest announcement, but reduced losses somewhat after a favorable inflation report.
Most scholars say that the ability of US consumers and businesses to import goods cheaply similarly leads to higher standard of living and more efficient production for businesses.
