The U.S. tariff train has already hit Mexico and Canada, just as President Donald Trump has promised. His plans to bring it to Europe next will make €38 billion worth of food exports, including France’s Champagne or Italy’s Parmigiano cheese, much more expensive for Americans.
The U.S. and Europe rely on each other for trade on various goods, from medical products to cars. However, the gulf between European imports and exports has been vast for a while now, and Trump has threatened to address this with tariffs.
Just the possibility of tariffs hurt Champagne exports in France last year as producers grappled with the uncertainty of policy changes.
Trump’s 25% steel and aluminum tariffs will kick off later this month, directly impacting Europe. More could follow in the next months as the president has flirted with imposing 25% on the bloc’s products, too. He claimed last month that the European Union was “formed to screw the United States” and that it had managed to do a “good job of it” so far.
If these charges eventually hit Europe’s hallmark produce, such as wine, Champagne, and cheese, it could make a slew of goods more expensive to sell in the U.S.
“There is a whole public of people in the U.S. that seems to need the culture of Europe,” Alexandre Chartogne, who owns Champagne maker Chartogne-Taillet, told the Financial Times. A third of the Champagne he makes is sold in the States.
“They can try to copy but it will only ever be an imitation,” he added.
A painful tit-for-tat
European Union chief Ursula von der Leyen has vowed to retaliate against tariffs, and the bloc is considering blocking imports of some U.S.-made agricultural goods. Trump previously warned that the EU will “pay a big price” for exporting significantly more than it imports from the U.S.
This is especially true for food and agricultural products, Rabobank analysts Barend Bekamp and Hosang Wu pointed out in a note, with the value of exports over double that of imports.
“The U.S. market is attractive for EU companies because of its size and ability to pay premium prices,” they wrote. Wine, dairy, and distilled spirits were among the European food products sold in American markets, and they stand to be impacted by taxes. The food and agricultural products earmarked for the U.S. account for 13% of the EU’s total exports.
If history offers any hints for the future, tariffs and promises of countermeasures could quickly escalate a trade war between the two regions, destabilizing global trade.
At least that happened in the 1960s when the so-called “chicken wars” between Europe’s biggest economies, Germany and France, and the U.S. broke out. Europe imposed tariffs on American poultry at the time as the region’s reliance on it left Western European farmers in a pickle. The U.S. responded with tariffs on various goods, from trucks to brandy.
Europe’s poultry imports from the U.S. plummeted by 50%, but the ripple effects spread far beyond the food and agricultural sector. It hurt European automakers, who were suddenly faced with mountainous American tariffs, while American auto giants couldn’t modernize without access to foreign competition.
Those policies shifted the trade dynamics between the two regions significantly.
While it’s hard to guess just how probable Trump’s sweeping tariffs might be, the president took similar steps during his first term in response to an Airbus dispute between Europe and the U.S. That hurt the expansive world of European wine, cheese, and olive oil, but trade remained relatively unperturbed.
However, a fresh round of tariffs may have a more noticeable impact, especially as countries recover from sky-high inflation.
