The situation: President Donald Trump is threatening a broad new round of tariffs on some of the US’ closest trading partners, raising the risk of a wide-ranging trade war with key European allies.

• Trump threatened to impose 200% tariffs on French wine, including Champagne, if French President Emmanuel Macron declines to join his proposed “Board of Peace.”
• That threat follows Trump’s announcement of tariffs of up to 25% on “any and all goods” from Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, and the UK—countries that recently sent troops to bolster military readiness on Greenland. Those duties are set to begin at 10% on February 1 and rise to 25% on June 1, unless the US reaches a deal to purchase the Arctic island.

It is unclear what legal authority Trump would use to impose these levies. That ambiguity matters because the Supreme Court is weighing challenges to the administration’s use of emergency powers under the International Emergency Economic Powers Act (IEEPA), which Trump has cited to justify several existing tariffs, including the so-called “Liberation Day” duties and levies on Canada, Mexico, and China. A ruling against the administration could undercut or delay some of the proposed measures, depending on how they are structured.

Impact on US consumers: Tariffs ultimately raise prices, eroding consumers’ spending power.

• A new analysis of $4 trillion in shipments between January 2024 and November 2025 by the Kiel Institute for the World Economy finds that US consumers and importers absorbed 96% of tariff costs, effectively turning tariffs into a consumption tax.
• While many retailers were able to pull forward inventory last year to avoid higher duties, much of that buffer has now been exhausted. As a result, tariffs are starting to “creep into” prices on Amazon, CEO Andy Jassy told CNBC.
• Higher everyday prices are already pushing lower- and middle-income consumers to pull back on discretionary spending, per Bank of America Institute. That pressure is one reason why we expect core US retail sales to decelerate through 2029.

Broader implications for brands and retailers: The administration’s actions risk triggering longer-lasting disruptions beyond near-term price increases.

• In the short run, the European Parliament is likely to pause work on the EU–US trade deal struck last July.
• At the same time, European leaders are discussing retaliatory measures, including use of the EU’s Anti-Coercion Instrument—the so-called “trade bazooka”—which could restrict US suppliers’ access to European markets and impose additional financial penalties.

However the standoff ultimately resolves, one thing is clear: Policy uncertainty will continue to hang over US and global markets, complicating planning and investment decisions for brands and retailers throughout the year.

Go further: Read about how the Trump administration has affected retail and other industries in our report, “President Trump’s Second Term: How the Administration Has Shifted Retail, Media Advertising, Tech, Health, and Finserv.”