US Slaps Tariffs on European Goods in Growing Trade Conflict

Wine bottles sit in a boutique shop in Le Cannet-des-Maures, France, on Oct. 10, 2019. European producers of premium specialty agricultural products like French wine are facing a U.S. tariff hike on Friday. (AP Photo/Daniel Cole)

(CN) – A trade conflict between the United States and Europeans got uglier Friday after the Trump administration imposed new tariffs on an array of European goods, many of them luxury items like Scotch malt whiskeys, Italian gourmet cheeses, expensive French wines and Spanish olives.

Tariffs on $7.5 billion in goods kicked in on Friday as a result of a long-running dispute between the U.S. and Europe over subsidies to airplane manufacturers Airbus and Boeing.

Across Europe, feelings are growing even more bitter toward Trump and his “America first” policy, which uses a mercantilist approach to world trade. Trump believes in beefing up the U.S. economy by reducing the U.S. trade deficit with the erection of trade barriers. Critics warn his approach, which many see as an outdated protectionist model, will hurt not only competing economies but the U.S. economy too.

The tariffs are expected to hit Scotland’s whiskey industry very hard. With a 25% tariff on Scotch whiskeys, the industry warns it will suffer $516 million in losses, more than half of the $835 million in tariffs against goods from the United Kingdom.

“Trump has shown a marked fondness for using U.S. economic muscle in an attempt to intimidate other nations into helping him ‘Make America Great Again,’” The Scotsman newspaper lamented.

The newspaper questioned Trump’s past vows of love for his ancestral Scotland. “His words may sound like those of a friend but, as his attack on one of Scotland’s most important industries shows, he is not.”

Earlier this year, the World Trade Organization found that several European nations unfairly subsidized Airbus to the detriment of U.S. aircraft manufacturer Boeing. In response, Trump decided to impose tariffs even though doing so will further rankle the European Union and worsen relations between the world’s two biggest trading partners.

The WTO is expected to rule next year that the U.S. too is guilty of subsidizing Boeing. The EU and U.S. insist they want a negotiated settlement to ward off tariffs, but talks have gone nowhere so far.

The European Commission said it will monitor the impact of the U.S. countermeasures, particularly in the agricultural sector. Trade commissioner Cecilia Malmstrom said the United States can now expect retaliatory tariffs stemming from a WTO appellate ruling in April 2019 in a years-long dispute over Boeing subsidies from Washington state, where the aircraft manufacturer is headquartered.

“We regret the choice of the U.S. to move ahead with tariffs. This step leaves us no alternative but to follow through in due course with our own tariffs in the Boeing case, where the U.S. has been found in breach of WTO rules,” Malmstrom said in a statement. “Imposing tariffs on each other serves nobody’s long term interest. It will inflict very significant damage to the highly integrated supply chain of the aircraft sectors in the U.S. and the EU and will result in collateral damage to many other sectors already suffering under the current trade tensions.”

The EU’s $20 billion list of U.S. products targeted for tariffs includes fresh and dried produce, ketchup, wine and liquor, and pharmaceuticals.

Trump insists his get-tough policy is simply making the playing field even. The U.S. has a trade deficit of about $169 billion with the EU. The EU exports about $688 billion in goods a year to the U.S.

The brunt of the new tariffs is going to be borne by France, the U.K. and Germany, the countries that provided the cheapest loans to Airbus. The company is jointly owned by Germany, France, Spain and Britain’s BAE System. Spain, Italy and Ireland will be affected too by the tariffs.

There’s growing concern that the U.S. and the EU are entering a trade war that could hurt both economies and add more strain to a world economy in danger of recession.

“I think this will not be in the interest of the U.S., it would not be in the interest of the EU, and it would have, of course, negative consequences on the level of the world growth,” Bruno Le Maire, France’s economy minister, said on Thursday. “I think that our responsibility is to do our best to avoid that kind of conflict.”

Last year, Trump imposed tariffs on steel and aluminum from the EU in a move that Europeans charged was done out of protectionism in violation of international trade rules. In retaliation, the EU imposed tariffs on about $3 billion worth of U.S. steel, agricultural and other products, including Harley Davidson motorcycles and orange juice.

The trade tensions come as talks between the U.S. and EU are stalled over a wide-ranging free trade agreement, the Trans-Atlantic Trade and Investment Pact.

A key sticking point in those talks is over U.S. demands that American agricultural products be allowed to enter the European market. But Europe has resisted, arguing that U.S. agricultural products are unsafe. Europeans are wary of genetically engineered crops, the use of growth hormones in animals and practices such as decontaminating chickens with chlorine. Europe also worries that its smaller farmers would be wiped out as massive American farming operations take over.

The trade battle could get worse. Trump has threatened to place tariffs on European automobiles, which is a major industry in Europe, especially export-dependent Germany. If that were to happen, the EU would certainly hit back with its own tariffs.

Meanwhile, Trump’s moves to undermine the WTO by blocking judge appointments have threatened to bring the trade organization’s work to a standstill in December. This too is upsetting the EU, which accuses Trump of seeking to undermine the trade body.

(Courthouse News reporter Cain Burdeau is based in the European Union.)

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