Uncertainty of EU Tariffs Hangs Over U.S. Importers

February 14, 2020
The next skirmish in President Donald Trump's trade war could be coming shortly with a fresh round of tariffs on some of the European Union's most popular exports.
The Office of the United States Trade Representative announced last month that tariffs as high as 100 percent could be added to products such as Irish and Scotch whiskeys, Cognac, and Parmesan cheese as soon as mid-February.
The ongoing dispute stems from a U.S. effort to halt European subsidies to civil aircraft manufacturer Airbus, which the World Trade Organization has ruled in violation of free trade rules. This is only the latest bout in a years-long clash over government support for aircraft companies. The EU has separately pursued action against the U.S. for its support of Boeing.
The crisscrossing allegations haven't stopped the U.S. from putting its weight behind its own efforts to force EU compliance.
"Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft," said U.S. Trade Representative Robert Lighthizer in a March statement.
The WTO in the fall approved up to $7.5 billion worth of tariffs on European exports each year until Airbus is no longer subsidized. The Trump administration in October 2019 moved forward with 10 percent tariffs on civil aircraft and 25 percent tariffs on agricultural goods.
The current list of products is extensive and covers popular European imports such as whiskey, liqueurs, dried cherries, olives, canned seafood, and dozens of varieties of specialty cheese. Other targets include non-military helicopters, aircraft, and various parts used in aviation.
Now the U.S. wants to increase the pressure with higher rates and a more severe trade tactic known as carousel or rolling tariffs, which periodically target different goods. This spreads the burden of increased export costs but creates additional uncertainty for local industries and economies.
The new tariffs could expand to cover Champagne and luxury leather handbags as well — two emblematic European imports here in the States.
Carousel tariffs, however, can create uncertainty for importers as well, and some U.S. companies have spoken out against the escalation.
"You really can't plan for the future when you have these debilitating tariffs hanging over your head," Thomas Gellert, president of food product supplier Atalanta, told Cheddar.
He said his company cannot absorb the cost of the current 25 percent tariffs, let alone 100 percent tariffs, and that customers should anticipate immediate price increases.
"When every six months they're going to change the items, you can't run a business that way," Gellert said. "This tax, and it's basically a tax, is going to be impacting consumers quite shortly."
The Distilled Spirits Council of the United States said the industry has taken a hit since Trump rolled out the first wave of tariffs. The EU's retaliatory 25 percent tariff on American Whiskey has caused the product's export market to drop 27 percent since 2018.
"The data is clear," said Council President and CEO Chris Swonger. "These tariffs are chipping away at American Whiskey's brand equity in our top export markets."
In addition, the administration is threatening a 100 percent tariff on $2.4 billion in French goods in response to the country's new digital services tax that it says unfairly targets U.S. companies such as Google, Facebook, Amazon, and Apple. France passed the measure over concerns that the companies were avoiding taxes on digital transactions.
The Trump administration's success in passing a North American trade deal and a "Phase 1" trade agreement with China did not, it turns out, signal the end of its aggressive trade agenda.
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