Did Bernard Arnault Trick Donald Trump?

Rumors are circulating in the wine industry that Bernard Arnault successfully tricked Donald Trump into removing Champagne from the initial set of tariffs on French wines.  While there are always rumors, this particular rumor is consistent with some very unusual facts.

First, we know for a fact that Champagne was excluded from the first round of tariffs.  And this makes absolutely no sense. First, Champagne, and the leading Champagne brands sold by Arnault’s LVMH, are likely the most well known and profitable wine brands in France.  While American collectors may look down on their entry level offerings, Veuve Clicquot, Moët and other large houses are known and purchased by tens of millions of Americans.

Champagne should have been the first product targeted for retaliatory tariffs.  It has large sales here

and it is very profitable.  Additionally, it is a prestige product for the French.  France’s President Emmanuel Macron does not want to go down in history as the politician who killed Champagne in the US market.

Additionally, one of the principles of crafting tariffs is to target wealthy and influential businessmen.  This encourages them to use their political leverage to pressure politicians to resolve the trade dispute.  By removing Champagne, Trump allowed Arnault to sit this conflict out.

A second key piece of evidence is in the drafting of the tariff language itself.  The language reads, “wine other than Tokay (not carbonated), not over 14 percent alcohol.”  I don’t want to get too high school English teacher here but this sentence is horribly written.  Technically, the “not carbonated” modifies the word Tokay given its proximity to that word.  Of course, that makes no sense as there is no sparkling Tokay so clearly the intent is that the sentence reads as “wine OTHER than 1) Tokay, 2) any carbonated wine or 3) any wine over 14 percent alcohol.”  I would also point out that adding Tokay here was pointless as all Tokay is from Hungary and Hungarian wines were not taxed at all.  My point here is that the likelihood that this sentence was written by someone experienced in drafting trade language approaches zero.  The only other person who had the ability to impact this language is Donald Trump himself who, while well written, is not experienced at drafting documents such as this.  It is very clear that the original language was modified by the President himself to remove Champagne and Tokay.

Bernard Arnault is worth approximately $100 billion.  That’s about ten times Trump’s reported net worth of $10 billion.  I’m not saying that Arnault is ten times as clever as Trump.  But it certainly seems like in this exchange between old acquaintances that Arnault has gotten the better of his American friend. 

President Trump seems to have realized that Arnault got the better of him and has targeted Champagne in the second round of tariffs.  If he really wants to stick it to Arnault, he should exempt from tariffs Champagnes that export under 10,000 cases per year to the US.  That would allow small French growers to continue to earn a living and increase their market share at the expense of the world’s third richest man.  Which should give Arnault added incentive to pressure his friend Macron to make the concessions necessary to resolve this issue in a manner favorable to the United States.  It would also make Trump look good for protecting the “little guys” - small importers here in the US and small growers in France.