WASHINGTON, March 13 (Reuters) – U.S. President Donald Trump on Thursday announced a potential 200% tariff on European wine, cognac, and other alcohol imports, intensifying the ongoing global trade dispute and raising concerns over its impact on financial markets and the U.S. economy.
Stocks dropped sharply, with the S&P 500 finishing more than 10% below its recent record high, signaling the start of a market correction. The new tariff threat follows the European Union’s decision to impose retaliatory tariffs on American whiskey and other goods, a response to Trump’s recent implementation of 25% tariffs on steel and aluminum imports. The European Commission has yet to comment on Trump’s latest threat.
The trade friction has extended beyond the U.S.-EU relationship, as Canada, a close ally and major aluminum supplier to the U.S., retaliated with countermeasures. Canada has also taken the dispute to the World Trade Organization. Talks between U.S. and Canadian officials on Thursday failed to resolve the issues.
Trump’s trade threats have continued since his return to office in January, despite many being postponed. At an Oval Office meeting with NATO Secretary-General Mark Rutte later Thursday, Trump reaffirmed his plans to impose reciprocal tariffs on all trading partners by April 2, citing the need to address long-standing trade imbalances.
“We’ve been ripped off for years, and we’re not going to be ripped off,” he stated.
The brewing trade war has cast alcohol as a focal point. U.S. bourbon exports are being pulled from Canadian shelves, while Trump’s remarks about potentially annexing Canada have further strained ties. U.S. Commerce Secretary Howard Lutnick met with Canadian officials in Washington to discuss the escalating tariff dispute, but no breakthroughs were achieved.
Canada has also firmly rejected Trump’s call to revisit dairy provisions in the U.S.-Mexico-Canada trade agreement, a contentious issue that Trump has frequently criticized. However, it was not part of the latest talks.
The EU’s countermeasures, valued at €26 billion ($28.31 billion), include duties on products such as dental floss and bathrobes, which carry symbolic weight. However, the proposed 50% tariff on U.S. bourbon could significantly impact the American spirits industry, which has seen strong export growth since the previous tariff disputes were resolved.
According to the Distilled Spirits Council of the United States, the EU accounted for 40% of all U.S. spirits exports in 2023, while the U.S. represents 31% of European wine and spirits exports. A 200% tax would hit European producers hard, particularly major companies like Pernod Ricard, which has already downgraded its sales forecasts due to Chinese duties imposed last year.
Industry groups on both sides of the Atlantic are calling for de-escalation. “This cycle of tit-for-tat retaliation must end now!” urged spiritsEurope, a trade association.
Despite concerns over the economic consequences, U.S. Treasury Secretary Scott Bessent downplayed Wall Street volatility, arguing that the Trump administration’s long-term focus on revitalizing U.S. industries was more important. He claimed that the EU would face greater economic losses due to its dependence on U.S. exports.
The ongoing tariff threats have created uncertainty for businesses across industries, including aerospace, automotive, and consumer goods. Even Tesla, owned by Trump advisor Elon Musk, warned that the trade war could expose the company to retaliatory tariffs.
Many economists worry that the escalating trade tensions could trigger a recession, as a recent Reuters/Ipsos poll showed that 70% of Americans expect higher costs from Trump’s tariffs. While Trump argues that the alcohol tariffs will boost domestic production, U.S. importers and distributors warn of significant losses, including job cuts and business closures.
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