Former U.S. President Donald Trump has once again ignited trade war concerns by threatening to impose a staggering 200% tariff on wines, champagnes, and other alcoholic beverages originating from France and other European Union (EU) countries. This latest salvo is in retaliation for what Trump describes as the EU's “nasty” 50% tariff on US-produced whiskey.

Trump conveyed his threat via his Truth Social platform, stating that if the EU does not immediately remove its tariff on American whiskey, the United States will swiftly enact the 200% tariff on European alcoholic products. This move is the latest in a series of trade disputes initiated by Trump, who has consistently used tariffs as a tool to pressure countries on trade and policy matters.

The EU's tariffs, which target approximately $28 billion worth of US goods, are a direct response to Trump's imposition of tariffs on steel and aluminum imports. These EU tariffs, set to take effect in stages starting in April, affect a wide range of American products, from bourbon to motorbikes. Trump has decried the EU as “one of the most hostile and abusive taxing and tariffing authorities in the World,” accusing the bloc of being “formed for the sole purpose of taking advantage of the United States.”

The potential impact of these escalating trade tensions has raised concerns in financial markets, with fears of a possible recession looming. While US stocks showed some resilience recently, uncertainty prevails as the trade war continues to unfold.

US distillers have expressed their disappointment with the EU's levy on American whiskey. Chris Swonger, head of the Distilled Spirits Council, stated that reinstating these tariffs would further impede growth and negatively impact distillers and farmers across the country, especially when the spirits industry is already facing a slowdown in the US market.

Past experiences have demonstrated the damaging effects of such tariffs. In 2018, similar tariffs led to a 20% decline in American whiskey exports to the European Union. However, the subsequent lifting of these tariffs in 2021 resulted in a remarkable surge of nearly 60% in US whiskey exports, highlighting the sensitivity of the market to trade policies.

The legal basis for Trump's proposed tariff hike on European alcohol remains unclear. His previous tariff actions have targeted countries like Canada, Mexico, and China, citing concerns over fentanyl smuggling, illegal immigration, and unfair trade imbalances. These actions have often been met with retaliatory tariffs from affected countries, including the EU.

European Commission chief Ursula von der Leyen has defended the EU's countermeasures as “strong but proportionate,” emphasizing the bloc's willingness to engage in meaningful dialogue. However, she cautioned that the escalating trade war threatens jobs and could drive up prices, ultimately harming businesses and consumers on both sides of the Atlantic.

As the trade war intensifies, the global economy faces increasing uncertainty and the potential for significant disruptions in international trade flows.