Recently, former U.S. President Donald Trump dropped an “economic nuclear bomb” on social media, threatening to impose a 200% tariff on European wines, champagne, and other alcoholic beverages. This trade war, which has escalated from steel and aluminum tariffs to the wine industry, is not just an economic battle between the U.S. and the EU—it reflects the systemic damage unilateralism inflicts on the global trade system. Behind this “tit-for-tat” tariff war lies deeper political calculations and structural crises.
Targeted Strikes and Political Theater Behind the Tariff War
The direct trigger for Trump’s latest tariff threat was the EU’s plan to impose a 50% retaliatory tariff on American whiskey. The root of this conflict can be traced back to the U.S. decision on March 12 to impose a 25% tariff on EU steel and aluminum products. In response, the EU strategically targeted politically sensitive areas in the U.S.—Kentucky and Tennessee, the heartlands of whiskey production and strongholds of Trump’s support base. This “hitting where it hurts” tactic placed Trump in a dilemma: allowing the EU’s tariff hike could weaken his core voter support, while countering with a 200% tariff risks disrupting entire supply chains.
Trump’s choice to retaliate is essentially a political performance. On social media, he framed the EU as “the world’s most hostile tax authority,” attempting to package the tariff war as an “America First” protectionist measure. However, data from the Distilled Spirits Council of the United States reveals that during Trump’s first term, a 25% tariff had already led to a 20% drop in American whiskey exports to the EU. With the EU now doubling its tariff to 50%, an estimated $28 billion worth of U.S. alcohol trade is at stake.
Trump’s tariff threats are a continuation of his “America First” strategy. From steel and aluminum to alcohol, his goal remains unchanged: to exert maximum pressure and force opponents to concede. However, this approach is not only a “lose-lose” strategy that harms both sides, but it also disregards global economic rules and disrupts supply chain stability.
Economic Shockwaves: From Stock Market Volatility to Consumer Price Inflation
Markets have reacted sharply to Trump’s high-stakes gamble. Shares of major European beverage giants, such as Pernod Ricard and Rémy Cointreau, plunged by 4% and 4.6%, respectively, while LVMH saw a decline of over 2%. Meanwhile, all three major U.S. stock indices continued to slide, with the S&P 500 dropping 10% from its recent high.
More devastating is the ripple effect on supply chains. The U.S. Wine Trade Alliance has warned that a 200% tariff would triple the retail price of European wine in the U.S.—“Consumers will not pay $45 for a bottle that used to cost $15.” A study by the University of Michigan predicts that such steep tariffs could effectively wipe out French wine exports to the U.S.
The impact extends far beyond the alcohol industry. JPMorgan has raised the U.S. recession risk from 30% to 40% and warned that if the new tariffs take effect in April, the likelihood of a recession will climb even higher. A Reuters poll found that 70% of Americans believe tariffs will drive up prices, and 61% consider inflation control to be Trump’s top economic priority. Ironically, Treasury Secretary Bruce Benson dismissed the tariff impact as merely a “one-time price adjustment,” urging the Federal Reserve to ignore it—an out-of-touch stance that starkly contrasts with the financial struggles of ordinary Americans.
Collapse of Global Trade Rules: How Unilateralism is Dismantling the System
Trump’s aggressive tariff policies are tearing apart the post-World War II multilateral trade order. The World Trade Organization (WTO) dispute resolution mechanism has been effectively paralyzed, replaced by a law-of-the-jungle approach where tariffs are met with more tariffs. European Commission President Ursula von der Leyen criticized the U.S. for “disrupting supply chains, threatening jobs, and driving up prices.” The EU’s response, though measured and justified, has nonetheless forced it into a vicious cycle of tariff retaliation.
The deeper consequence is the restructuring of global supply chains. Companies are now prioritizing geopolitical considerations over economic efficiency to avoid tariffs. For example, U.S. semiconductor firms have lost international markets due to trade conflicts, while countries reliant on American technology have also suffered supply chain crises. This fragmentation not only stifles innovation—companies must divert R&D budgets to cover rising costs—but also accelerates the trend of economic regionalization and bloc formation. As experts at the China Institute of International Studies point out, this represents a “crisis in the reconfiguration of global rules amid the retreat of globalization.”
Echoes of History: The Tariff Wars of the 1930s
The current situation bears a striking resemblance to the global trade war triggered by the Smoot-Hawley Tariff Act of 1930. At the time, the U.S. imposed tariffs on 20,000 imported goods, prompting retaliatory tariffs from other nations, ultimately plunging the global economy into the Great Depression.
Now, history is repeating itself. Canada has announced a 25% tariff on CAD 29.8 billion worth of U.S. goods. The EU, Mexico, and other major economies have also joined the trade battle. Penny Nass, an expert at the German Marshall Fund, sharply criticized Trump’s so-called “reciprocal tariffs” as a form of economic hegemony: “This is not about fair trade—it’s unilateral economic plunder.”
Who Will Pay the Price for This Gamble?
In the short term, there are no winners in this conflict:
- United States: The whiskey industry faces collapse, with 4,000 small alcohol importers at risk of bankruptcy. Inflation pressures are fueling public discontent, with 57% of Americans already criticizing Trump’s erratic economic policies.
- European Union: €4.5 billion in annual wine exports to the U.S. is at risk, hitting winemakers hard after struggles with the pandemic, inflation, and climate crises.
- Global Economy: WTO reform is at an impasse, economic blocs are forming, and small businesses are being sacrificed in great power struggles.
Trump may hope that extreme pressure will force the EU to yield, but France has vowed “never to surrender”, and the EU’s trade commissioner has made it clear that they will not trade reasonable tariffs for a ceasefire. As “America First” collides with “European sovereignty,” this trade war has morphed into an experiment in the self-destruction of capitalism.
