President Donald Trump is back with new tariffs, this time targeting wine and liquor from the European Union. Here’s what this could mean for the industry and consumers. 

Why is Trump targeting wine and liquor from the EU now? 

On Thursday, March 13, Trump threatened to impose a 200% tariff on all wines and other alcoholic goods imported from Europe in retaliation for the EU’s plan to tax American whiskey. The EU’s move to levy a tax on United States whiskey was itself a response to Trump’s decision to increase the EU aluminum tariff to 25%.

“The European Union, one of the most hostile and abusive taxing and tariffing authorities in the World, which was formed for the sole purpose of taking advantage of the United States, has just put a nasty 50% Tariff on Whisky,” Trump wrote on Truth Social, a platform he is the majority investor in. “If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES. This will be great for the Wine and Champagne businesses in the U.S.”

According to Commerce Secretary Howard Lutnick, the decision to use all capital letters demonstrates that Trump is “annoyed” at the EU. 

“The President was totally annoyed that the Europeans did this, and so you’re going to hear back from someone who emotionally cares about America,” he told Bloomberg Television. “He cares about America, and he wants to take care of Americans. And why are Europeans picking on Kentucky bourbon….”

Here’s how much the wine and liquor trade between the U.S. and the EU is worth

According to data from Eurostat, EU wine exports to the U.S. were valued at nearly $5 billion last year, accounting for almost 30% of the EU’s overall exports in the category. Of that percentage, France made up close to half and Italy nearly 40%. Chris Swonger, the president and CEO of the Distilled Spirits Council, shared that this new tariff could be devastating not just to producers in the EU but also to retailers and consumers across the U.S. 

What is the U.S. wine and spirits industry saying about the tariffs?

“The U.S. [and] EU spirits sector is the model for fair and reciprocal trade, having zero-for-zero tariffs since 1997. The U.S. spirits sector supports more than $200 billion in economic activity, 1.7 million jobs across production, distribution, hospitality, and retail, and the purchase of 2.8 billion pounds of grains from American farmers,” Swonger shared in a statement with Food & Wine. “We urge President Trump to secure a spirits agreement with the EU to get us back to zero-for-zero tariffs, which benefits the hospitality industry and U.S. craft distillers who export their products. We want toasts, not tariffs.” 

How much more would Americans have to pay for wine?

It’s difficult to calculate exactly how much of the cost of the tariffs will be passed on to consumers, as this depends on how much companies exporting their goods are willing to reduce prices to lessen the impact of the tariff on the other end — but unfortunately it likely means you’ll be paying more for your favorite bottle of vino if it comes from the EU.

The U.S. operates a three-tiered system for alcohol distribution: A producer (such as a brewer, vintner, or distiller) must sell to a wholesaler, who then sells to individual retailers, who then can sell to you — and the cost of tariffs will be felt at each level of this system. So while a wholesaler might be willing to absorb the price of a tariff, that doesn’t mean the next tier will be, making it even more likely that consumers would pay.

Even if there are still doubts about who will pay the price along this journey from producer to glass, past data indicates that placing a tariff on a product will transfer costs to the consumer.

For example, a report by the U.S. International Trade Commission found that the implementation of tariffs on steel and aluminum in 2018 led to a “near complete pass-through to import prices,” with the cost of these goods rising 22% and 8% respectively, which the report noted was nearly the “full value of the tariff.” 

The U.S. Tax Foundation also cites work by economists Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy, and Amit Khandelwal, who examined the result of tariffs imposed in 2018 and 2019 on washing machines, solar panels, aluminum, steel, and other goods from the EU and China. They discovered that importers and consumers “bore the entire burden of tariffs and estimated a net loss to the US economy of $16 billion annually, including more than $114 billion in losses to firms and consumers, offset by small gains to protected producers and revenue gains to the government.” 

The Tax Foundation notes that, “While more tariffs are likely to raise prices for imported goods, how they will affect the overall price level and inflation rate depends on how the Federal Reserve responds.”

It goes on to explain that businesses and consumers will have two options, but either one will come at a cost: They can pay more for the tariffed good or for higher-priced domestic substitutes. Per the foundation, “Under either scenario, businesses and workers in the United States would be worse off than if the tariff had not been imposed.” 

And unfortunately for all of us who enjoy a great glass of wine, a 200% tariff means that resulting price increases could be catastrophic. AP News gives a clear example of what this might look like, explaining that if the entirety of the tariff is passed on to the consumer, that means a $15 bottle of Prosecco could potentially cost $45. For many Americans, that’s the difference between being able to buy a celebratory bottle and skipping one entirely.