Trump's trade war is stirring up booze battles

• From American whiskey to French Champagne, alcohol has become a factor in Trump's trade war.
• Both beverages could see tariffs in the coming weeks unless the US reaches a deal with the EU.
• Businesses, from wine shops to restaurants, are already reacting to the potential tariffs.

President Donald Trump might not drink, but his trade war is shaking and stirring up the market for some of the most popular boozy beverages globally.

On Wednesday, the European Union responded to US tariffs on aluminum and steel by imposing a 50% duty on various products starting on April 1, including one of the US's most well-known drinks: whiskey.

Just a day later, Trump threatened a 200% tariff on wine and alcohol from EU countries, including iconic French Champagne. It's unclear when or if that levy will take effect, but it's already prompting reactions in the US.

Some wine shops, for instance, are promoting specials for customers who want to stock up on European wine, with one in New York City sending out emails to regular customers offering "tariff buster" deals.

Alexandra Ivanac and her husband Stephen Varela, who run the Italian-Croatian restaurant Villa Berulia in Manhattan, said Trump's threats are "alarming." The restaurant carries about 75 European wines and upcharges alcohol 2.5 to 3 times, higher than many dishes.

"How does an Italian restaurant pivot away from European wine?" Varela said.

It's making them question whether to absorb the costs or pass them on to customers. Ivanac said they may instead look to South America, South Africa, Australia, or New Zealand for wines if the tariffs go into effect, as well as some California wines. Varela also said they may order twice as much wine as normal and stockpile it in their basement.

"Some of these wines are going for, on the higher end, $200 to $300, so how much could we really increase prices?" Varela said, adding some customers are more cautious about spending given economic concerns.

The US accounts for about 31% of EU wine and spirit exports, according to Eurostat, the EU statistics office. The EU, meanwhile, made up about 40% of the export market for US spirits in 2023, according to the Distilled Spirits Council of the United States.

For US winemakers, the latest tariff threat could be an opportunity.

Zach Pelka, cofounder and COO at New York-based Une Femme Wines, said his company developed a supply chain that sits almost entirely within the US after COVID made sourcing abroad more complicated and expensive.

Pelka said he expects more US-based alcohol brands to focus domestically if Trump's 200% tariff takes effect.

If the US's threats come true, Pelka expects that Une Femme will become a more attractive option for restaurants, retailers, hotels, and other customers who want a steady source of wine in the US.

"As of today, I think it becomes the focal point of the pitch" to buyers, he said of the potential tariff.

Tariff talk has already caused consumers in other countries to buy from local suppliers instead of importing from the US. Many Canadians are looking for "Made in Canada" alternatives in light of the levies that the Trump administration has threatened and enacted on that country's goods.

Whether any or all of the taxes materialize remains to be seen. Last week, Trump imposed a 25% tariff on imports from Canada and Mexico — only to suspend it shortly afterward for most items until April 2.

Even if the tariffs take effect, drinkers might not see higher prices right away.

Blake Leonard, president of wine at Stew Leonard's Wine & Spirits, which operates several shops in Connecticut, New Jersey, and New York, told BI that some of her suppliers brought months' worth of European wine and even tequila from Mexico into the US to get ahead of potential tariffs.

That early action will help Stew Leonard's keep prices for many beverages stable, at least temporarily. "The last thing we want to do as a family business is raise prices for our customers," Leonard said. About half of all wine that the chain sells comes from European nations — primarily France and Italy, she said.

To say the situation is fluid "would be a massive understatement," said Lawson Whiting, the CEO of Brown-Forman, which makes Jack Daniel's whiskey and counts Europe as a major export market. "It seems like things are changing very, very quickly."

The April 1 effective date for the EU's tariffs on US whiskey leaves time for the US and the EU to resolve their differences, Whiting said at an industry conference on Wednesday, the day the EU announced its latest tariffs.

"That does give me some optimism that both the administration and the other counterparties over the last few weeks have been trying to resolve things," Whiting said.

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