EU proposes tariffs on $20B of US imports

Dive Brief:

The European Union on Wednesday released a preliminary list of U.S. imports to be considered for tariffs, in response to a World Trade Organization (WTO) ruling that found the U.S. illegally subsidized Boeing. The list includes products such as seafood, fresh and dried produce, nuts, alcohol, chemicals, adhesives, suitcases, handbags and tractors, representing a total of $20 billion of U.S. exports to the EU.
The EU's list follows a proposal last week from the Office of the U.S. Trade Representative (USTR) to put tariffs on $11 billion worth of EU imports. At the time, the EU said it was ready to retaliate in kind. "But let me be clear, we do not want a tit-for-tat," EU Trade Commissioner Cecilia Malmström said in Wednesday's announcement. "While we need to be ready with countermeasures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the U.S."
An arbitrator appointed by the WTO will decide the value of goods appropriate for tariffs. The EU will release a final list "taking into account the arbitrator's decision in the near future," the European Commission said.

Dive Insight:

While the lists of tariffs from the EU and U.S. are preliminary, the EU proposal sounds a warning bell for U.S. companies with global supply chains that import from or export to the EU. There's a possibility the WTO could determine the values of goods subject to tariffs must be lower than the proposals, or the EU and U.S. could follow through on a commitment made last year to work toward zero tariffs. Still, it's likely many of these businesses will plan around the worst-case scenario to mitigate potential tariff impact.

A similar situation unfolded with tariffs on $200 billion worth of Chinese imports. Although the duty rate remains at 10%, companies such as Dollar Tree and Williams-Sonoma shifted their business plans and sourcing with the assumption tariff rates would rise to 25%.

"The only way for a business to operate is to assume things could get worse before they get better," Maine Pointe CEO Steve Bowen previously told Supply Chain Dive.

Retaliatory tariffs on $20 billion worth of U.S. imports to the EU could prove particularly taxing for U.S. businesses. The U.S. exported $319 billion worth of goods to the EU last year, according to data from the Census Bureau. Top categories included machinery, pharmaceuticals and medical equipment.

In 2016, the latest data available from USTR, U.S. exports of agricultural products to the EU totaled $11.5 billion, including nuts, soybeans, wine and beer and prepared food. Several of these items are on the EU's preliminary list of goods to face countermeasures.

The likelihood of an impending trade resolution seemed to increase when the EU gave the green light Monday to open formal negotiations with the U.S. The EU continues to emphasize the U.S. is an important trading partner and that it remains open to discussions. So far, no specific dates for talks have been announced by the EU nor the U.S. This latest list of proposed tariffs could sour the mood and add further tension to U.S.-EU relations.