President Donald Trump has threatened to impose a 200% tariff on European wines, including French champagne, in retaliation for the European Union’s recent 50% levy on American whiskey. [read the full champagne story]
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This escalation follows the U.S.’s implementation of a 25% tariff on steel and aluminum imports, prompting concerns over a potential trade war.
Significant losses
European producers, particularly in France, are alarmed by the prospect of such steep tariffs. French wine producers recall the significant losses from the 25% tariffs imposed in 2019, which led to a 40% drop in U.S. sales and cost the sector €500 million. The U.S. remains the largest export market for French wine and spirits, with exports totaling €3.8 billion annually. The French cheese industry also suffered €14 million in losses due to previous tariffs. Additionally, French perfume and beauty product manufacturers fear similar retaliation as the EU considers tariffs on make-up, with significant exports at risk.
A trade war
The potential for a trade war has also unsettled European financial markets. European shares have transitioned from gains to losses amidst escalating trade war tensions. Germany’s DAX index, along with markets in France and Italy, experienced declines, and the euro weakened. The European Central Bank has urged a negotiated solution to these disputes to prevent further economic instability.
This development adds strain to the already complex trade relations between the U.S. and the EU, with both sides facing pressure to resolve the escalating tensions to protect their respective economies.
