Trump’s 200% Alcohol Tariff Threat Shocks European Drink Firms

President Donald Trump has threatened a 200% tariff on all alcoholic products shipped from the European Union, dismaying drinkers, restaurateurs, bar owners and suppliers across the US.

A reciprocal tariff-free trade agreement that has existed between the EU and the US since 1997 could be ripped up as a consequence of Trump’s anger at a European levy on “America’s native spirit” — otherwise known as bourbon. Taxes on US-made boats and motorbikes by “one of the most hostile and abusive taxing and tariffing authorities in the world,” as he described the EU in a post on Truth Social, didn’t help.

The tariff threat has shocked both makers and drinkers of booze, and many are seeking ways to mitigate the potential threat of a tax war with Trump.

The impact of a 200% tariff would be catastrophic. Davide Campari-Milano NV, whose brands include Aperol, has said a 25% tariff would result in losses of between €50 million ($54.5 million) and €60 million. A 200% tariff implies a €444 million hit before any mitigating factors are taken into account, according to analysts at Jefferies.

Using the same math, Remy Cointreau SA would face losses of €543 million, Pernod Ricard SA would see a €1.6 billion impact, and Diageo Plc would stand to take a $1 billion hit, Jefferies said.

Experts expect to see some stockpiling of spirits ahead of any possible tariffs. While larger companies are prepared to adapt, distributors are already sitting on high levels of stock, which limits their ability to increase stockpiles and tie up cash in warehouses.

Some EU-based wine importers are securing bonded warehouses to delay paying higher taxes on shipments should tariffs become policy. Bonded warehouses are government-certified storage facilities that permit customers to defer tax payments on goods.

Avner Schneur, an entrepreneur and chief executive officer of Mana Wine, knows first-hand just how popular “bonded wine” now is. His broader storage and delivery business oversees 3.5 million square feet of secure storage space in New Jersey, which holds fine art, documents, and pathology samples. Catering to the residents of all five boroughs of New York and Long Island and New Jersey, Schneur says he only has one floor dedicated to wine but plans to expand.

“The demand for bonded wine has skyrocketed,” Schneur said, adding that his company has received requests from multiple wine importers urgently looking for custom bonded storage.

“Everybody is terrified about the tariff, and because the tariff is coming in a day’s notice, you can be totally cooked because you have to pay right away.”

While Schneur is optimistic about short-term demand, that could change in a few months. If retailers hesitate to buy due to uncertainty over consumer demand, it could slow down imports.

Some EU-based wine importers are securing bonded warehouses to delay paying higher taxes on shipments should tariffs become policy. Bonded warehouses are government-certified storage facilities that permit customers to defer tax payments on goods.

Avner Schneur, an entrepreneur and chief executive officer of Mana Wine, knows first-hand just how popular “bonded wine” now is. His broader storage and delivery business oversees 3.5 million square feet of secure storage space in New Jersey, which holds fine art, documents, and pathology samples. Catering to the residents of all five boroughs of New York and Long Island and New Jersey, Schneur says he only has one floor dedicated to wine but plans to expand.

“The demand for bonded wine has skyrocketed,” Schneur said, adding that his company has received requests from multiple wine importers urgently looking for custom bonded storage.

“Everybody is terrified about the tariff, and because the tariff is coming in a day’s notice, you can be totally cooked because you have to pay right away.”

While Schneur is optimistic about short-term demand, that could change in a few months. If retailers hesitate to buy due to uncertainty over consumer demand, it could slow down imports.

Vodka can be made anywhere, but with vodka sales in the US already under pressure due to oversupply and competition from tequila, brands will be reluctant to invest in a big manufacturing shift, according to one large drinks maker.

Companies may adopt cost-cutting measures such as bottling locally or shipping liquid across borders, according to Jefferies, though any such moves will depend on the rules attached to the tariffs.

Campari CEO Simon Hunt said on March 5 that the company was considering expanding production in the US.

During times of financial duress, chocolate and potato chip makers, among other producers, have been known to shrink product packaging and strategically minimize the use of costly ingredients without bringing down prices.

Read More: Chocolate Makers Want to Sell You Anything But More Chocolate

As US consumers cut down on spending, drinks makers are already promoting smaller and less expensive bottles as a way to boost sales — for instance, Diageo’s 50ml bottles of its Don Julio tequila. Companies are also expanding into canned cocktails, which enjoy higher per-unit margins than bottles of spirits. Drinks companies could also minimize costs through using cheaper ingredients.

As imported wines occupy a distinct place in the US market, tariffs wouldn’t necessarily push consumers towards domestic varieties, said Sharon Sevrens, a sommelier and owner of Amanti Vino, a wine store with branches in Montclair and Morristown, New Jersey.

Sevrens has been stockpiling and said she is prepared to keep prices stable for as long as she possibly can if Trump follows through on his threat. Her importers are doing the same.

“Most of my importers – all of those who could afford to – have stockpiled inventory. Some even brought in a full year’s worth of anticipated supply in advance, which is already in their US warehouses. It was a very expensive move, but they saw it as necessary,” she said.

Still, once those reserves run low, she added, price increases will be unavoidable.