President Donald Trump initiated a new round of trade disputes on Thursday, threatening to impose a 200% tariff on champagne and other alcoholic beverages imported from the European Union (EU). This warning escalates ongoing trade tensions that have already unsettled global markets and heightened concerns of a potential recession.

Response to EU Tariffs

This development follows the EU’s announcement of proposed tariffs totaling $28 billion on a variety of American products, with a notable 50% tariff specifically targeting U.S. whiskey. The EU’s decision serves as a retaliatory measure against U.S. tariffs implemented on steel and aluminum imports, which have already sparked considerable international concern.

Trump urged the EU to retract its whiskey tariffs, warning that failure to do so would lead to swift retaliatory action from the U.S. in the form of elevated tariffs on European alcohol products.

Trump’s Critique of the EU

In his remarks, Trump criticized the EU as being “one of the most hostile and abusive taxing and tariffing authorities in the World,” highlighting the escalating strain in transatlantic trade relations.

Market Reactions

As news of these trade threats broke, stock futures reacted negatively. Key indices such as the S&P 500 and the tech-heavy Nasdaq saw declines after a brief period of gains. Futures for the Dow Jones Industrial Average continued to reflect losses from previous trading sessions.

Market volatility has increased since Trump announced a series of tariffs last week, including a 25% tariff on imports from Mexico and Canada, although some of these tariffs were later postponed.

Global Trade War Dynamics

The ongoing trade war has seen various countries respond with their own countermeasures. For instance, Canada has reacted to recent U.S. tariffs by implementing retaliatory tariffs on $20.7 billion worth of American goods, further complicating trade environments given that Canada is a major supplier of steel and aluminum to the U.S.

Additionally, the Trump administration’s imposition of a 10% tariff on imports from China has deepened tensions, with China retaliating by levying similarities on U.S. agricultural products, marking an escalation between these two economic giants.

Concerns of Economic Downturn

The rising trade tensions have triggered fears of a looming recession on Wall Street. Goldman Sachs recently adjusted its estimated probability of a recession from 15% to 20%, while Moody’s Analytics now regards the likelihood at 35%—a significant increase reflecting market uncertainties.