The tariff threats are in response to the European Union’s decision to introduce tariffs on €26bn ($28bn) worth of US goods from April: which will hit American whiskey hard.
These tariffs, announced on March 11, are themselves in retaliation for tariffs on steel and aluminum.
But the huge 200% tariff on products would take the trade war to the next level: reshaping markets like never before.
Wine imports
The US is one of the top importers of wine: it’s the third largest importer of wine by volume and largest import market by value.
In 2023, the import market decreased 14.6% by volume in 2023 on the previous year; with sparkling wine dropping 18% in volume and 17% in value, according to the latest report from OIV.
But it still remains a huge and important market – and tariffs would annihilate the US market for European wines, explained Ignacio Sanchez Recarte, secretary general of the Commite Europeen des Entreprises Vins.
“If the proposed 200% tariffs on EU wines are implemented, it would effectively shut down the US market for EU wines — a devastating hit for our industry,” he told us.
“Wine exports to the US reached €4.5 billion in 2023-2024, representing 27% of our total exports. There is no alternative market that could compensate for such a loss.
“We urgently call on both the European Commission and US governments to find a resolution on the steel and aluminium dispute and put an end to the threat of these tariffs once and for all…. and until then, leave wine out of unrelated disputes and any retaliatory list of products!”
France – the world’s largest wine producer – is set to feel any tariffs particularly acutely. The country’s finance minister, Eric Lombard, responded to the tariffs proposals by calling the escalating US-EU trade war ‘idiotic’ on Friday. He is set to travel to the US to meet with US counterparts.
Spirits, too, would likely be affected by 200% tariffs, causing alarm in this industry as well.
“This cycle of tit-for-tat retaliation must end now,” said Pauline Bastidon, Director Trade & Economic Affairs for industry association spiritsEUROPE. “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.”
American wine: Winners in a trade war?
Tariffs on EU wine could wipe out an entire sector of the wine shelf in the US. That does create opportunities for American wineries to leap in and fill the gap.
But that takes a very simplistic view of the wine category.
“For nearly 25 years, Wine Institute has steadfastly supported the ‘Wine for Wine’ principle that wine should not be targeted for retaliation in disputes unrelated to wine,” a spokesperson for Wine Institute, the voice for California wine, told us.
“The current dispute has never been about wine and these tariffs will only hurt the broader wine sector including farmers, vintners, distributors, retailers and the millions of people working across the extended wine supply chain. Wine Institute urges both governments to work towards a solution on steel and aluminum.”
That’s a sentiment echoed by Zach Pelka, chief operating officer of Une Femme Wines, a company out of Sonoma, California.
Une Femme Wines should, theoretically, be set to benefit from the tariffs on European wine – but in fact is opposed to the move.
“While a 200% tariff sounds like it could be a short-term win for American wineries, in reality it will cause far more harm than good to the entire ecosystem for four reasons,” said Pelka.
“The long-term damage to the US/Europe relationship cannot be understated. European consumers are some of US producers’ best customers and partners around the globe. American winemakers export billions of dollars worth of wine – especially from California – to Europe each year. If those markets close or shrink due to retaliation, American wineries will lose one of their most important international sales channels.
“Secondly, here in the US, American wine drinkers will suffer, facing both higher prices and reduced choice.”
Driving up US wine prices
Tariffs on European alcohol could also be inflationary to American wines.
If tariffs on EU imports are implemented, American wineries face a choice. They can embrace their advantage and continue to sell products at their current prices, undercutting European products. However, with such a huge price difference between the two categories, they may use the opportunity to increase their own prices.
The reality is that most brands will do both: raising prices to capture margin but continuing to undercut European products. That would drive up prices across the category as a whole.
“Restaurants and retailers will undoubtedly suffer, because restaurants depend on European wines for a substantial portion of their business.
“And distributors and importers who rely on a diverse wine portfolio will suffer immediately, as a significant portion of their book will be impacted. Following a year of many layoffs at the country’s top distributors, we as an industry can’t afford to have another blow to this important part of the wine business. If importers and distributors suffer, we have a weaker distribution network for all wines, including domestic wines.”
American Champagne
Champagne from France would be particularly affected. Already a high value good, 200% tariffs would sent prices rocketing.
Exports are crucially important to Champagne. 42.6% of volume sales are sold in France, but 57.4% are from exports.
Top export markets for Champagne (by value)
US €810m
UK €550m
Japan €447m
Germany €268m
Italy €256m
Australia €175m
Switzerland €165m
Belgium €162m
Spain €135m
Canada €84m
Source: Comite Champagne
And the US remains the top destination for Champagne, by both volume and value, according to Comite Champagne.
Some 26.9 million bottles are sent to the US a year, worth €810m (the second largest market, the UK, accounts for 25.5m bottles but only €550m in value).
Again, the US represents a market that’s hard to replace.
American Champagne
Trump’s post on Truth Social on Thursday morning said a 200% tariff on all wines and Champagne out of the EU would be ‘great for the wine and Champagne businesses in the US.’
However, there is no American Champagne – Champagne can only be made in the Champagne region of France and enjoys geographical protection in the US (in a 2006 wine trade agreement, the US agreed to honor EU labeling standards, such as the protected designation of origin labels of Champagne, Prosecco, Cava and more).
Furthermore, what defines Champagne is – alongside the production processes – the terroir of the extremely limited region it can grow in: making it impossible to replicate the drink in the US.
French Champagne vs American Champagne?
Champagne’s unique nature is something that’s hard for US wines to replicate. But comparing one to another misses the point, says Pelka, of Une Femme Wines.
“We believe that American wines are as great as they are now because we’ve learned so much from European traditions,” said Pelka. “Countless American winemakers have spent years or decades learning the craft from winemakers abroad. The reality is that we’re all one big community… we push each other to become better, and to bring wine drinkers the very best wines possible from each of our regions around the world.”
One of Champagne’s top selling points is its prestige and heritage: but that differentiator may not stand up to the stark realities of price, says Pelka.
“Of course, Champagne, Cava and Prosecco producers craft many of the most storied wines in history. Unfortunately, when faced with a 200% tariff, prestige can become a secondary concern for many consumers. A bottle of Champagne that retailed for $60 may now cost $180 with importer, distributor and retailer mark-ups due to tariffs. Even those who love heritage wines may be unwilling or unable to pay that premium.
“That kind of shift in consumer behavior has already been observed at smaller price increases: when 25% tariffs were imposed in 2019, many buyers switched to domestic sparkling wines. A 200% tariff could accelerate that shift dramatically.”