Trump’s trade war: EU threatened with 200% alcohol tariffs

Alcohol tariffs "clearly a negative" for consumers and industry

Chris Beckett, head of equity research at wealth management firm Quilter, says Trump's latest tariffs are "clearly a negative" for both American consumers and the European alcohol industry.

"Provenance matters when selling premium spirits and wine – cognac has to be from Cognac, champagne from Champagne etc. As a result, it is not a category that the Trump administration will encourage onshoring with," he says.

"That said, what this could do is result in some substitution from consumers to American sparkling wine and domestic spirits. This in turn would result in increased sales for some American businesses and Trump could still declare victory in one way or another," he adds.

As Scotland is not in the EU, Scotch whisky is not currently included in the threat. Beckett points out that this industry was targeted with 25% tariffs during Trump's first presidency, with performance taking a hit as a result. He adds that the sector will be "desperate not to see a repeat of this".

"For now, the UK government is taking an understandable but unprincipled decision to stay as far away from US/EU trade disputes as possible in the hope British businesses are left untouched, or at worst face lower tariffs being implemented," Beckett says. Trump and prime minister Keir Starmer have had a relatively positive relationship so far, but the US president is famously unpredictable.

How have stock markets responded?

European alcohol companies have seen their share prices fall as a result of the news.

Pernod Ricard, a constituent of the French CAC 40 has dropped around 4% today, at the time of writing. Its brands include Absolut vodka, Beefeater gin, Malibu rum and more. The US is one of the company's top markets, with 18% of net sales coming from the region in first half of the fiscal year 2025.

Remy Cointreau is also down almost 4%, while Davide Campari is down closer to 5%.

Trump reaches for the bottle in latest tariff threats

Welcome back to our live blog. The latest news today is that teetotaller Donald Trump has threatened to slap a 200% tariff on any alcohol coming into the US from the EU. Trump made the announcement on his social media platform Truth Social today.

This is essentially a retaliatory tariff against a retaliatory tariff. It comes after the EU announced countermeasures yesterday in response to steel and aluminium tariffs from the US. The EU said it would impose taxes on up to €26 billion worth of goods from the US, including bourbon.

"[Tariffs on EU alcohol] will be great for the Wine and Champagne businesses in the U.S.," Trump wrote on social media.

A pedant might counter that Champagne technically needs to originate from the Champagne region of France.

Valuation opportunities?

There has been a lot of talk of US recessionary risks ramping up but Daniel Casali, chief investment strategist at wealth management firm Evelyn Partners, thinks US stocks could stage a recovery. In his view, the outlook for company earnings still looks positive.

He says: "As it stands the consensus expects MSCI USA earnings-per-share (EPS) growth of 12.1% in 2025, a modest downgrade from 14.5% at the start of the year. However, in early January, EPS for 2026 has been revised up to 14.5% from 13.2%. Overall, there has been little change in companies' earnings expectations when averaging out this year and next."

If these earnings forecasts remain robust, and the economy doesn't deteriorate significantly from here, Casali argues that today's environment could offer a good buying opportunity.

"The recent US equity price falls mean valuations for the so-called US ‘Magnificent Seven’ (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla) look more favourable. For instance, their aggregate forward price-to-earnings ratio is at a 40% premium compared to the rest of the US S&P 500, its lowest level since 2018," he explains.

We will leave you with that thought as we sign off for the evening. Thank you for joining us.

US inflation: some good news

Markets did receive some good news today in the form of a lower-than-expected US inflation reading. The headline figure came in at 2.8% in February, down from 3% in January. Wall Street analysts had been forecasting a reading of 2.9%.

Despite this, Lindsay James, investment strategist at wealth management firm Quilter, says it is a "step into the unknown" from here.

She adds: “Ultimately, tariffs are an inflationary economic tool and will raise prices for consumers. Whether this is a one-time price change or something more sustained remains to be seen, but Donald Trump was elected in part due to his rhetoric to bring down inflation and make things cheaper. Tariffs are the opposite policy response in order to make this happen and instead risk tipping the US economy into recession. We are already seeing weak data points emerging as a result of the policies of the Trump administration – although other elements do continue to hold up.

“Should the data turn weaker and economic growth slow down in response to tariffs, then the Federal Reserve is likely to have little choice but to cut rates. However, it could find itself in somewhat of a predicament if GDP growth slows at the same time as inflation picks up after the effects of the new tariff regime have bedded in. This will make it harder to act. This is something that is concerning markets just now.”

UK still hoping for a trade deal

No retaliatory measures have been announced by the UK so far. Prime minister Keir Starmer told MPs that he is still trying to negotiate a trade deal. "I'm disappointed to see global tariffs in relation to steel and aluminium, but we will take a pragmatic approach," he said at Prime Ministers' Questions.

Canada to impose 25% reciprocal tariff tomorrow

Earlier this afternoon, Canada's finance minister Dominic LeBlanc announced that the country would impose reciprocal tariffs of 25%, impacting an additional C$29.8 billion of US goods. The tariffs will kick in from tomorrow.

These measures are in response to steel and aluminium tariffs from the US, which kicked in today. Canada is the biggest importer of steel into the US, bringing in around 6.6 million net tons last year.

What does it mean for markets?

“The winds keep blowing in different directions on tariffs, meaning that it is impossible for markets to establish the lay of the land,” said Russ Mould, investment director at AJ Bell. “It’s no wonder share prices have been bobbing up and down faster than a boat in a storm.”

US markets haven’t opened yet today, but they have taken a beating in recent weeks thanks to Trump’s tariff announcements. The S&P 500 is down almost 8% over the past month, while the Nasdaq is down more than 11%. The contagion effect has been felt globally, albeit to a lesser extent than in the US.

Despite this, European stock markets have risen so far this morning after the EU’s countermeasures were announced, indicating the strong response has been received positively by investors. Markets may also have been buoyed by the news that Ukraine is willing to accept a 30-day ceasefire proposed by the US (Russia is yet to publicly comment).

Von der Leyen: countermeasures are “strong but proportionate”

President of the European Commission Ursula von der Leyen reiterated a message we have heard from various sources in recent weeks – that tariffs aren’t good for anyone.

“Tariffs are taxes,” she said. “They are bad for business, and even worse for consumers. These tariffs are disrupting supply chains. They bring uncertainty for the economy. Jobs are at stake. Prices will go up. In Europe and in the United States.”

Justifying the countermeasures, Von der Leyen added that the EU needed to take action to “protect consumers and businesses”. She described the EU’s measures as “strong but proportionate”.

The EU bites back

Welcome back to our live blog covering US president Donald Trump’s trade war.

Another week, another tariff announcement. This time, the measures are coming from the European Union (EU) which has announced retaliatory measures against the US. These are in response to Trump’s steel and aluminium tariffs which were announced in February, but kick in today (12 March). Trump’s metal tariffs apply to imports from all countries and are being levied at 25%.

The EU has said its countermeasures will impact US goods worth up to €26 billion in total, “matching the economic scope of the US tariffs”. The measures will come into effect in April, taking two forms:

• Firstly, the EU will resume tariffs that were previously imposed on the US under the first Trump presidency. “These countermeasures target a range of US products that respond to the economic harm done on €8 billion of EU steel and aluminium exports,” the European Commission said. These measures will kick in on 1 April.
• Secondly, the US will deliver a package of new tariffs impacting an additional €18 billion worth of US goods. These measures will kick in from mid-April.

As we sign off for the weekend, we will leave you with one positive. This week's tariff disruption could create opportunities for investors to snap up companies that are well-positioned to weather the storm – and at a lower price.

"For long-term investors, there’s some value hunting to be done here," says Derren Nathan, senior equity analyst at Hargreaves Lansdown. "Global tech giants with diverse geographical footprints are still well poised to lean into mega-trends such as artificial intelligence, electrification and automation."

We will be taking a closer look at this topic next week. Join us then.

How has the S&P 500 performed since markets opened today?

US stock markets have continued to fall today. At the time of writing, the S&P 500 is down around 1% compared to market open.

A weaker-than-expected US jobs report probably hasn’t helped things. US non-farm payrolls came in at 151,000 in February (versus a Reuters consensus estimate of more than 160,000). This is still higher than January’s revised estimate of more than 125,000.

Unemployment also ticked up slightly from 4% to 4.1%.

Richard Carter, head of fixed interest at wealth management firm Quilter Cheviot, described the report as “solid, if unspectacular”. He also points to “concerns that things may begin to sour in the coming months”.

Carter says tariff disruption is making it difficult for businesses to plan ahead, which could result in a delay to the reshoring of jobs that Trump is hoping to achieve.

Policy rollback does little to boost markets

The exemptions announced by Trump did little to boost the US stock market yesterday, with the S&P 500 ending the day 1.78% lower. The Nasdaq fell even further, down 2.61%.

"Even though Donald Trump has made more goods exempt from tariffs on Canada and Mexico, it’s the constant tinkering that’s upset investors," said Russ Mould, investment director at platform AJ Bell.

"If Trump had stuck to his guns, companies could have planned adjustments accordingly and known the lay of the land. The fact Trump keeps changing his mind confuses matters as companies have no idea what’s going on from one day to the next. That also means investors are unsure how to position their portfolios," he added.

Mould points out that the VIX measure of volatility jumped by 13.5%, "illustrating how investors are feeling nervous". He adds that futures suggest we could see a small recovery in US markets today, though.

Canadian goods shipped under existing free-trade pact will be exempt from tariffs

The exemption given to Mexico, which we reported on yesterday evening, will also apply to Canada.

In other words, goods shipped under North America's existing free trade agreement (the US-Mexico-Canada Agreement, or USMCA) will not be subject to tariffs.

Trump has also reduced the tariff on potash (an important ingredient in fertilisers) from 25% to 10%. This is used by US farmers.

The White House has said that around 62% of Canadian imports and 50% of Mexican imports will still face tariffs because they do not fall under USMCA.

Good morning and welcome back to our tariff live blog. In the time since we signed off yesterday evening, Trump has also rolled back tariffs on a large number of Canadian goods. Stick with us for full details and analysis on what it means for markets and the economy.

That concludes our live coverage for today, but we will be back tomorrow with further updates and analysis. Thank you for joining us.

No mention of a pause for Canada

So far, there has been no mention of a similar exemption for Canada. Trump has continued to criticise Canadian prime minister Justin Trudeau on social media over the past hour.

Trudeau has taken a strong stance in his response to Trump in recent days, announcing retaliatory tariffs of 25% against $155 billion worth of American goods. The Canadian prime minister also called Trump's tariffs a "dumb thing to do".

Some Canadian provinces have also taken US liquor off the shelves in a show of defiance against the US.

The US stock market is in the red again today. At the time of writing, the S&P 500 has fallen 1.6% since market open.

Trump describes relationship with Sheinbaum as "very good"

Writing on social media platform Truth Social, Trump said: "After speaking with President Claudia Sheinbaum of Mexico, I have agreed that Mexico will not be required to pay Tariffs on anything that falls under the USMCA Agreement. This Agreement is until April 2nd".

USMCA, which stands for the United States-Mexico-Canada Agreement, is an existing free trade agreement.

Trump described his relationship with Sheinbaum as "very good" and said he was "working hard" with Mexico to address border concerns.

Trump has previously accused Mexico of failing to stop illegal immigrants and fentanyl supplies from crossing the border into the US.

He has also used fentanyl as an excuse to impose tariffs on his norther neighbour, even though Ottawa claims less than 1% of fentanyl intercepted at the US border comes from Canada.

Trump suspends tariffs on Mexico

Over the past hour, reports have emerged that Trump has suspended tariffs on Mexico until 2 April after talking with Mexican president Claudia Sheinbaum. More details to follow.

US carmakers rally on tariff exemption

General Motors, Stellantis and Ford all tumbled at the start of the week on the tariff news, but began to rally as hints of a rollback in policy emerged on Tuesday (4 March). They continued their recovery on Wednesday (5 March) when the White House announced a one-month exemption on tariffs for carmakers.

Investors will be breathing a sigh of relief for now, but uncertainty still lingers. The president is famously unpredictable. Carmakers could find themselves facing the exact same crisis this time next month when the exemption period comes to an end.

The below chart is live and highlights the latest market moves, so will continue to refresh after this post was written. Click the tickers to see the performance of each stock.

What’s behind the carmaker exemption?

Tariffs on Mexico and Canada would come as a significant blow to US carmakers, and the latest exemption looks like an attempt to manage this. The sector has previously been highlighted as a case study of how economically damaging Trump’s tariffs could be to his own economy.

Take General Motors. Four of its plants are in Mexico and another four are in Canada. For comparison, the company has 11 plants in the US.

Car and Driver’s Caleb Miller writes that General Motors is heavily reliant on its Ramos Arizpe plant in Mexico for its transition to electric vehicles. He also points out that the company’s San Luis Potosí plant is where the Chevrolet Equinox is produced (Chevrolet is a part of General Motors). The Equinox was Chevrolet’s second-bestselling vehicle last year. Meanwhile, the production of Chevrolet’s bestselling model (the Silverado) is split between several plants, including ones in Mexico (Silao) and Canada (Oshawa).

General Motors is just one example. The big three (General Motors, Stellantis and Ford) all have part of their production line in Mexico, Canada, or both.

Tariff exemption for carmakers

Welcome back to our tariffs live blog. The main headline since we signed off yesterday is that Trump is granting carmakers a one-month exemption on the new 25% import taxes imposed on Mexico and Canada.

White House press secretary Karoline Leavitt delivered a statement from the president yesterday afternoon. This said: “We spoke with the big three auto-dealers. We are going to give a one-month exemption on any autos coming through USMCA [United States-Mexico-Canada Agreement].

“Reciprocal tariffs will still come into effect on April 2, but at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage.”

Leavitt said that Stellantis, Ford and General Motors requested a call with the president asking for the exemption, and that he was “happy to do it”.

More analysis to follow.

How concerned are you about the impact of tariffs?

That concludes our coverage for this evening. We will be back with further updates and analysis tomorrow. In the meantime, MoneyWeek would like to hear your thoughts on the latest tariff developments. What do you think it will mean for the pound in your pocket?

Early warning signs in the US economy?

Businesses are already starting to feel the first effects of the tariff-related disruption, based on recent data from the Purchasing Managers’ Index (PMI). The PMI is a survey which gives regular insights into business conditions across different areas of the global economy.

The latest PMI data showed that US exports fell at an increased rate in February – the second biggest drop in 20 months. “North American factories increasingly cited tariffs and trade policy issues as a cause of reduced exports,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

US factories also reported the biggest rise in input costs since November 2022. “These costs were often passed on to customers by US factories, which reported the sharpest rise in selling prices for two years,” Williamson added.

Despite this, US production growth currently looks strong. February's PMI saw production growth accelerate at the fastest rate since May 2022.

The death of the “Trump trade”?

The S&P 500 enjoyed a strong bull run last year, with a further boost coming from the election result in November. Investors were optimistic that tax cuts and deregulation would spell good news for businesses and sought to take advantage of what they were calling the “Trump trade”.

Sentiment has been far more negative in 2025, though, and the S&P 500 is now back where it was at the point of the election.

“Domestically, investors have begun to price in the effects of tariffs which could have unintended consequences such as weakening the economy as well as boosting inflation at a time the situation was coming under control,” said Richard Hunter, head of markets at platform Interactive Investor.

US markets were also rattled earlier this year by the emergence of Chinese chatbot DeepSeek, a rival to ChatGPT. The application delivers comparable performance to ChatGPT, but with lower development costs and less sophisticated semiconductor chips.

Until recently, the US was seen as the undisputed frontrunner in the AI race, but the emergence of DeepSeek suggests China might not be as far behind as previously imagined.

Tech stocks, which have driven US indices higher in recent years, have suffered as a result. With the exception of Meta, the share price performance of the Magnificent Seven has been disappointing so far this year.

A "toxic" trade environment

Economists at European bank ING have described the current trade uncertainty as “toxic for companies and their investment decisions”. However, they believe there is still the opportunity for trade deals to be formed.

They write: “Positive comments towards Australia, China's measured tariff response, diplomatic efforts from India and Japan, and potential consultations between the EU and the US could still result in a watered-down tariff approach. That tariffs will be avoided altogether is not a realistic expectation in the current global trade environment, however.”

Retaliatory tariffs

Canada: Canadian prime minister Justin Trudeau called the latest tariffs “a dumb thing to do”. He announced retaliatory tariffs of 25% against $155 billion worth of American goods. Tariffs on the first $30 billion came into effect yesterday, with the remaining $125 billion due to follow 21 days later.

China: Foreign ministry spokesman Lin Jian said China would “fight [the US] to the bitter end” if it persists in waging a trade war. China announced retaliatory measures including tariffs of up to 15% on American food and agricultural products.

Mexico: Mexican president Claudia Sheinbaum has also promised retaliatory tariffs, but will not announce these until a public speech on Sunday.

Tariffs: a recap of everything the US has announced so far

The latest tariffs on Canada, Mexico and China this week follow on from previous announcements in February. Here is a recap of all of the tariffs that have been announced so far:

• 25% tariffs on Canadian goods (with a carveout for energy products, which will be taxed at 10%) – effective 4 March
• 25% tariffs on Mexican goods – effective 4 March
• 20% tariffs on Chinese goods – first 10% tariff effective 4 February, before being doubled to 20% on 4 March
• 25% tariffs on steel and aluminium imports – effective 12 March

Trump has also hinted at potential tariffs on cars, semiconductor chips, pharmaceuticals and agricultural products. He has indicated that these could be in the region of 25%, with an announcement coming on 2 April.

The president has also suggested that “reciprocal” tariffs could follow on 2 April for countries who impose taxes against the US. This could target a broad range of countries including those who impose VAT, raising fears that the UK could be hit.

What do tariffs mean for the global economy?

The scale of the economic impact will depend on how far Trump actually goes. For now, the line between threats and genuine policy remains fuzzy. What we do know is that there are rarely any winners when it comes to trade wars.

Tariffs typically push up costs for consumers as it becomes more expensive for them to buy imported goods. Domestically-manufactured goods can also become more expensive too, if they include imported components.

Washing machines are often cited as an example from Trump’s previous term. US tariffs imposed on imported washing machines between 2018 and 2023 pushed the cost of laundry equipment up by 34%, according to official statistics cited by the BBC. The price of dryers, an associated good which was not subject to tariffs, also went up.

Trump’s tariff threats this time around have been more wide-ranging, and so could prove even more disruptive.

A general rule that has been quoted by economists at Goldman Sachs, among others, is that each time the average tariff rate goes up by one percentage point, the rate of core US inflation goes up by around 0.1 percentage points.

As well as pushing inflation up, economists have warned that tariffs are likely to slow economic growth. Supply chain disruption and higher costs for businesses and consumers are rarely good news for the economy.

Markets rally on hope of a rollback in policy

Commenting on the latest developments in markets today, Russ Mould, investment director at platform AJ Bell, said: “European and Asian markets were on the front foot on Wednesday amid hopes that Donald Trump might partially wind back tariffs if deals could be struck with Canada and Mexico.

“Investors are looking for any signs that Trump is open to deals rather than doling out tariffs and refusing to listen. Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war.” Mould also noted a shift from “risk-off” to “risk-on” investments in the FTSE 100 this morning as investor optimism was buoyed by the prospect of an easing in policy.

The S&P 500 is down more than 3% over the past five days, at the time of writing.

Good Wednesday afternoon. Welcome to MoneyWeek’s new live blog on US president Donald Trump’s tariffs.

The trade war is heating up but the messages coming out of the White House remain unpredictable. Tariffs of 25% kicked in on Canadian and Mexican imports yesterday, and the levy on Chinese imports was doubled from 10% to 20%. However, later in the day, US commerce secretary Howard Lutnick said Trump could announce a deal on Wednesday (i.e. today) to meet Canada and Mexico somewhere “in the middle”.

This has calmed markets somewhat and raised hopes that Trump will backtrack – at least a little. But investors should brace themselves as the rollercoaster ride is likely to resume before long. The only thing that is predictable about the current inhabitant of the White House is his unpredictability.

Stick with us as we run through the latest news and share analysis on what it means for markets and the economy.