President Trump has threatened to impose 200 per cent tariffs on wine and champagne exported from the European Union unless the bloc removes its levy on American whiskey.
The European Commission said on Wednesday that it was planning to institute a 50 per cent surcharge on US whiskey exports to the EU in response to the US’s new tariffs on steel and aluminium.
In a post on Truth Social, his social media platform, Trump said that if the “nasty” tariff was not removed “immediately”, the US would “shortly” place a 200 per cent tariff on wine, champagne and other alcohol products coming out of the EU. “This will be great for the wine and champagne businesses in the US,” Trump said.
Eric Trump, one of the president’s children, owns and serves as the president of a vineyard in Charlottesville, Virginia, called Trump Winery. The 1,300-acre estate, located in the foothills of the Blue Ridge Mountains, offers wine-tasting services and houses a hotel. It sells a variety of wines, such as the “Presidential Reserve: Inaugural Edition”, a sparkling wine that retails for nearly $250 and features under Eric Trump’s own collection.
Eric Trump owns the 1,300-acre estate in Virginia
The name “champagne” is a protected term, legally restricted to sparkling wines produced in the Champagne region of France.
The EU’s tariffs on US whiskey are set to come into force on April 1. The bloc placed a 25 per cent surcharge on American spirits in 2018, during Trump’s first term.
The Distilled Spirits Council of the United States, the American spirits trade body, said that over the three years between 2018 and 2021, when the last tariff was active, American whiskey exports to the EU fell by 20 per cent, from $552 million to $440 million.
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After the tariffs were repealed in 2021 under the Biden administration, whiskey exports from the US rose by nearly 60 per cent to $699 million last year.
Chris Swonger, president and chief executive of the Distilled Spirits Council, said: “We urge President Trump to secure a spirits agreement with the EU to get us back to zero-for-zero tariffs, which will create US jobs and increase manufacturing and exports for the American hospitality sector. We want toasts, not tariffs.”
Spirits Europe, the industry body which includes Rémy Cointreau, Pernod Ricard and Campari Group among its members, said it was “deeply alarmed” by the renewed threat of tariffs. “This cycle of tit-for-tat retaliation must end now,” a spokesman for the group said. “We urge both sides to stop using our sector as a bargaining chip in conflicts that have nothing to do with us.
“The EU and US must de-escalate this dispute now and ensure spirits are never again caught in the crossfire.”
Laurent Saint-Martin, France’s trade minister, said that Trump was “escalating the trade war he chose to unleash”. He added: “France remains determined to respond with the European Commission and our partners. We will not give in to threats and will always protect our sectors.”
LVMH, whose brands include Moët champagne, saw its shares drop by €6, or 1 cent, to €605.5 after Trump issued his threats, while Rémy Cointreau, the French distiller, fell by €1.98, or 4.2 per cent, to €45.08. Campari Group fell by €0.26, or 4.3 per cent, to €5.78, and Pernod Ricard dropped by €4.16, or 4.2 per cent, to €96.04.
America’s S&P 500 index, widely regarded as a barometer of America’s corporate health, fell into correction territory last night having lost more than 10 per cent from its record high last month due to Trump’s escalating trade war.
The S&P 500 index closed down 77.78 points, or 1.4 per cent, at 5,521.52, leaving the index 10.1 per cent lower than its most recent high in February. The S&P 500 now joins the Nasdaq in correction territory. The technology-rich index is 14 per cent down on its most recent high in December.
“Sentiment’s terrible,” Mike Dickson, head of research at Horizon Investments, said. “There’s new tariff headlines every day, and that’s weighing on things. It doesn’t feel great out there right now.”
How trade war could drain spirits groups
President Trump’s threat to raise tariffs to 200 per cent on European alcohol would wipe out the entire profit of Rémy Cointreau, the French cognac and brandy company, according to research from analysts at Bernstein.
While it would be the worst affected, all the big European alcohol manufacturers would take a significant hit, the analysts said.
About 90 per cent of Rémy Cointreau’s sales in the United States are imported from the European Union and it could see a 134 per cent drop in its earnings. It would be followed by Campari Group and then Pernod Ricard, which would see a 68 per cent and 41 per cent drop in profit respectively.
The British company Diageo, which imports only 12 per cent of its US sales from the EU, would see a dent in its earnings of 15 per cent, the analysts said.
Bernard Arnault, the boss of LVMH, is a long-time friend of Trump
NICHOLAS KAMM/AFP/GETTY IMAGES
Trump’s comments specified that all alcohol products would be affected, which would also mean a further hit to Diageo’s imports of Guinness and Heineken’s imports of its namesake brand of beer and Amstel.
At the same time, some producers with domestic American businesses would likely benefit from improved price competitiveness. Brown-Forman, owner of Jack Daniel’s and Southern Comfort, and Constellation Brands’ US wine portfolio could all pick up domestic market share in the event of a trade war, Bernstein said.
It is unclear whether Trump will choose to follow through with the threats. During his first term, Trump pledged to enact sweeping tariffs on French wine over Paris’s tax attitude towards American technology companies. However, he never carried out the threat after he reached a truce with President Macron.
In his second term, Trump has followed through with many of his threatened tariffs, though some have quickly been forgotten.
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Just hours after posting on Truth Social that he would double US tariffs on Canadian steel to 50 per cent several days ago, the threat was withdrawn, with Peter Navarro, Trump’s trade adviser, telling CNBC that “cooler heads prevailed”.
Howard Lutnick, US commerce secretary, told Bloomberg Television that he planned to speak to EU officials on Thursday, adding that he hoped “they’ll realise that they should take these things down”.
It is also unclear whether Trump’s personal relationships might also influence his ultimate decision. Of the European drinks manufacturers, LVMH saw the smallest drop in its share price — falling by little more than 1 per cent. Bernard Arnault, the founder and chief executive of the luxury goods conglomerate, is a long-time friend of Trump and his family attended Trump’s inauguration.