US threatens EU with 200% tariffs on alcohol

US President Donald Trump has 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 Mr Trump would enact stiffer trade barriers around the world's largest consumer market.

Mr 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 Mr Trump's 25% tariffs on steel and aluminium imports that took effect yesterday.

The European Commission had no immediate comment on Mr Trump's post.

Canada, a neighbour and close ally that is the Unites States' biggest aluminium provider, has also announced counter measures of its own to Mr Trump's metals tariffs and has taken the dispute to the World Trade Organization.

Mr Trump has threatened to impose an array of trade penalties since returning to the White House in January, though he has postponed action on many of them.

Read more: Tariff threat 'very concerning' for Irish spirits sector

At an Oval Office meeting with NATO Secretary-General Mark Rutte today, he said he would not back off from reciprocal tariffs he has vowed to impose on all trading partners on 2 April.

"We've been ripped off for years, and we're not going to be ripped off," he said.

Alcohol is shaping up to be a key friction point in the brewing trade war.

Some Canadian retailers have pulled American bourbon from their shelves as relations between the two countries have frayed and Mr Trump has threatened to annex that country.

US Commerce Secretary Howard Lutnick told Fox News he would meet with Canadian Finance Minister Dominic Le Blanc and Ontario Premier Doug Ford to discuss the tariffs, but said the US will be looking for some concessions from Canada.

"You have to remember, Canada exists, leaning on our economy," he said. "Why are we doing all this business in Canada if they're not respectful, if they're not thankful, and they don't want to do it?"

Many of the EU's proposed counter-measures, worth €26bn 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 US bourbon would be a significant hit for the industry, which has seen exports grow steadily since the United States lifted tariffs Mr 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.

Mr Trump's proposed 200% tax on European alcohol would create further headwinds for producers like Pernod Ricard, which has already cut its sales outlook due to Chinese duties imposed last year.

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.

Mr Trump says tariffs are a crucial tool to revitalise US industries that have withered due to decades of globalisation, and he has stacked his administration with officials who agree 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.

"I would counsel these government leaders that they are on the losing side of this argument economically," he said on CNBC.

Mr Trump's 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 Mr Trump's actions threaten international supply chains.

Even Tesla, owned by Trump adviser Elon Musk, argued in a letter to US trade officials that the trade war could make it a target for retaliatory tariffs against the US.

"As a US manufacturer and exporter, Tesla encourages USTR to consider the downstream impacts of certain proposed actions taken to address unfair trade practices," the electric automaker said in a letter dated 11 March.

Some economists say the uncertainty threatens the health of the US economy and raises the risk of recession. A Reuters/Ipsos poll released yesterday found that 70% of Americans expect Mr Trump's tariffs to make regular purchases more expensive.

Mr Trump said his alcohol tariffs would help domestic producers. But US importers and distributors said it would lead to lost sales, layoffs and shuttered businesses.