President Donald Trump has escalated tensions with the European Union (EU) by threatening to impose a 200% tariff on alcohol from the continent, in response to the EU's new 50% tariff on U.S. whiskey.
In a Truth Social post, Trump had labeled the EU as being among the most "hostile and abusive" tax authorities and said that unless the 50% tariff on whiskey was dropped immediately, the U.S. would put retaliatory tariffs on wine, champagne, and other alcoholic beverages from France and other EU nations.
Trump presented this step as being in the interest of U.S. wine and champagne companies, which might gain from the lack of European competition. The EU has already made attempts to address the situation by contacting U.S. counterparts, with reported calls between trade ministers in the works.
Trump's language became more pointed when he denounced U.S. trade practices as "stupid" and blamed the world for exploiting the U.S. in trade negotiations. In the meantime, the U.S. stock market responded negatively to all this. The major stock indexes closed the day in the red, with the S&P 500 flirting with correction levels, almost 10% below its February highs. The Nasdaq index, heavy in technology stocks, experienced losses, dropping over 14% from its February high.
The U.S. is the global leader in wine and champagne imports, the former reaching $4.9 billion in sales annually and the latter more than $1.7 billion. But wine and sparkling wine exports by the U.S. are much smaller and stand fifth and twelfth in the world, respectively. Tariffs imposed might end up pushing U.S. consumers to pay more, especially those dependent on imports.
The United States Distilled Spirits Council has called for Trump to negotiate a deal with the EU to abolish tariffs outright, with the argument that abolishing tariffs would secure U.S. jobs, enhance manufacturing, and profit the American hospitality sector. They urged the reinstatement of "zero-for-zero" tariffs, which would be advantageous to both areas without having any detrimental effect on consumers.
Despite global alarm among economists and business organizations, Trump's administration continues with its tariff-intensive trade policy. This follows a general trend of applying tariffs to correct perceived trade imbalances, with recent examples being the imposition of tariffs on steel and aluminum imports, which resulted in retaliatory duties by the EU and Canada.
Trump's opponents, especially in the champagne and wine sectors, alert that a 200% tariff would ruin U.S. businesses and consumers, as the U.S. is an important market for European wines. German wine producers, for instance, see the possible tariffs as disastrous, with the U.S. being an important export market.
French authorities, led by Trade Minister Laurent Saint-Martin, criticized Trump's moves as an aggravation of the trade war and vowed to safeguard their industries against such "aggressions.
Market responses have been mostly negative, with stock markets losing value and investors worrying about the increased costs of tariff hikes. Most economists contend that low-cost imports from the EU lead to higher standards of living and competitiveness in U.S. companies, and that tariffs would end up harming the overall economy.
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