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Whatâs in a trade war? Well, for starters, uncertainty.Â
That uncertainty can be about the what, when, or how much of US tariffs â in other words, about their details.Â
But that came and went quickly.
In just six months, weâve shifted from a world built on free trade to one where protectionism is rampant. Whether tariffs may or may not be the right answer to reshoring lost jobs, or simply the latest political tool in President Trumpâs agenda, this economic experiment will shape the future in profound ways.
As Mario Draghi, former President of the ECB, put it:
âWhen you start acting unilaterally in trade negotiations, with tariffs and subsudies, itâs very difficult to hamper someone that wants to do the same in two, three yearsâ time⌠Everything becomes more arbitraryâŚâ
Beyond geopolitics, trade wars have concrete economic consequences: lower margins across supply chains (including for US businesses), higher consumer prices, and weaker demand. Of course, thatâs the pointâto reduce demand for foreign goods and boost local production.
But when it comes to wine, will American producers really benefit? A protected border often means less access to affordable labourâthe largest cost input for many Californian and other US wineries.
Meanwhile, the dollar has weakened by around 8% year-to-date, according to the DXY. Against the pound and the euro, that translates into roughly an additional 10% increase in the price of a French wine sold via London. Tariffs are complex, but one effect is clear: uncertainty cools demand for dollar assets and, by extension, weakens the currencyâs purchasing power.
