Donald Trump has threatened to impose a 200% tariff on French wines and other alcoholic products from EU countries if the EU does not remove a 50% tariff on whisky.
The euro has weakened in response, with the EUR/USD exchange rate dropping from 1.0860 to a low of 1.0845, reflecting a 0.3% decline to around 1.0850.
Impact On French Alcohol
This marks a notable move against French alcohol. Trump’s approach often involves starting with large proposals that may later be adjusted. This announcement may overshadow any positive developments from ongoing German debt negotiations.
Trump has once again put pressure on European trade, and this time it is the drinks industry that stands to be affected. A 200% tariff on French wines and other alcoholic goods from the EU is not a small adjustment—it represents a major shift in transatlantic trade discussions. Given the existing 50% tariff on whisky, this could lead to higher tensions between both sides if compromises are not made.
The euro’s reaction has been swift. A drop from 1.0860 to 1.0845 may appear minor at first glance, but in currency markets, even such a movement can hold weight—especially when it happens within a short window. The 0.3% decline to around 1.0850 is a clear reflection of market unease. This is not just about tariffs, but about whether Europe will retaliate or seek a diplomatic resolution before things escalate further.
Tariffs of this scale are rarely implemented overnight. Trump’s style has, in many instances, involved making an initial demand that is later revised as negotiations unfold. We should not expect an immediate resolution, nor should we assume that this is the final form of the proposal. But what matters now is the uncertainty it has introduced.
German Debt Negotiations
Elsewhere, Germany remains engaged in key debt negotiations. Positive discussions on that front can sometimes lend support to the euro, but this latest development risks overshadowing any optimism. When a new factor enters the equation—particularly one that threatens trade—the market tends to pay more attention to potential disruptions than to slow-moving financial agreements.
The coming weeks will require a careful reading of political signals. Clarifications from the US administration or adjustments in tone from European leaders could influence the next moves in the currency market. Markets dislike unpredictability, and until a clearer picture emerges, volatility may persist.
