US 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 the US president 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 US’ biggest aluminum provider, has also announced countermeasures of its own to Trump’s metals tariffs.
Alcohol is shaping up to be a key friction point in the trade war Trump has launched since returning to the White House in January.
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 said his proposed 200% tax on European alcohol would benefit domestic producers, and shares of US drinks makers rose on the news.
Nevertheless, 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.
But his 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 US economy and raises the risk of recession.
70% of Americans expect Trump’s tariffs to lead to higher prices, according to a Reuters/Ipsos poll released on Wednesday.
The US president says tariffs are a crucial tool to revitalize US manufacturing 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 US economy.
He warned that the EU has more to lose in a trade war, as it relies more on exports to the United States.
“In the event that there’s a back and forth with tariffs, I would counsel these government leaders that they are on the losing side of this argument economically,” he said on CNBC.
