Dive Brief:
- Tariffs on $4 billion in goods from the U.S. to the European Union began Tuesday after the European Commission gave notice Monday. The EU will levy tariffs of 15% on U.S. aircraft as well as 25% on some industrial and agricultural products, including seafood, cheese, vegetable oils, cocoa powder, chocolate, ketchup, spirits, cotton, tractors and exercise equipment, among others.
- The tariffs follow a decision from the World Trade Organization last month, finding the U.S. has not adequately corrected a tax benefit for Boeing in the state of Washington it deemed to be unfair. "Due to lack of progress with the U.S., we had no other choice but to impose these countermeasures," said EU Trade Commissioner Valdis Dombrovskis.
- U.S. Trade Representative Robert Lighthizer disagreed with the EU characterization. "The alleged subsidy to Boeing was repealed seven months ago. The EU has long proclaimed its commitment to following WTO rules, but today’s announcement shows they do so only when convenient to them," Lighthizer said in a statement Monday.
Dive Insight:
Two years ago, President Donald Trump and then-President of the EU Commission Jean-Claude Juncker put out a joint statement, saying the pair intended to work toward zero tariffs. That hasn't happened, mainly due to disputes over favorable business conditions for aircraft manufacturers Boeing and Airbus, created by their home countries.
In April 2019, the U.S. proposed tariffs on $11 billion of EU imports. Since then, the two trading partners have levied tariffs against each other in a tit-for-tat manner — this round being the latest in that dynamic.
The coronavirus casts a new light on tariffs as many businesses are struggling, which has led in some cases to furloughs and layoffs.
"Hospitality businesses and our consumers, as well as producers, wholesalers and importers of distilled spirits, wine, and beer are being slammed from both sides of the Atlantic in an aircraft dispute wholly unrelated to the drinks business. This is on top of the closings of restaurants, bars, and distillery and winery tasting rooms because of the COVID-19 pandemic," wrote a coalition of 20 trade associations representing the wine and spirits industries of the U.S., EU and United Kingdom, calling for further negotiations and a suspension of current tariffs while the parties do so.
U.S. exports to the EU fell steadily from January to May with a small rebound since. But the trade balance between two partners has been increasingly leaning toward the EU since the rebound began, suggesting an increasing degree of imbalance.
Agricultural supply chains are already dealing with tit-for-tat tariffs between the U.S. and China amid the other stressors brought on by the pandemic. The tariffs from the EU cover cotton, sweet potato, vegetable oil, nut and fruit producers, which may now be confronting tariffs on multiple fronts.
Several European lawmakers expressed incredulity at the move coming so close to the transfer of power from Trump to President-elect Joe Biden. "It would be better to wait," tweeted Jörgen Warborn, a member of the European Parliament from Sweden. "Increasing tariffs will increase prices for consumers. We should build a new relationship with the new US president based on fewer tariffs."
Biden has expressed a desire for a more multilateral approach to trade but has not committed to a particular policy position with regard to existing tariffs put in place by the Trump administration.
"Removing these tariffs is a win-win for both sides, especially with the pandemic wreaking havoc on our economies. We now have an opportunity to reboot our transatlantic cooperation and work together towards our shared goals," Dombrovskis said.
