US, EU suspend tariffs on $11.5B worth of goods trapped in aircraft dispute

Dive Brief:

The U.S. and European Union on Tuesday agreed to suspend tariffs on $11.5 billion worth of goods for five years. The list of goods includes food, wine and spirits, and machinery, which were embroiled in a dispute over subsidies to Airbus and Boeing.
The five-year suspension follows a four-month suspension announced March 5 on the tariffs. "The suspension allowed both sides to focus on resolving this long-running dispute," a press release from the European Commission stated.
Duties were 15% on aircraft products and 25% on non-aircraft products. The European Commission said U.S. importers procuring products involved in the dispute paid $2.2 billion in tariffs in 2019 and 2020.

Dive Insight:

Food and beverage supply chains — particularly wine and spirits — faced a double whammy through much of the pandemic. They contended with reduced demand as restaurants closed, as well as steep tariffs on imports and exports.

The U.S. imposed tariffs in October 2019 on $7.5 billion worth of goods coming in from the EU, and the EU retaliated with countermeasures on $4 billion worth of imports from the U.S. in November 2020.

A coalition of 20 trade associations described importers of spirits, wine and beer as "slammed from both sides of the Atlantic in an aircraft dispute wholly unrelated to the drinks business" at the time the tariffs on U.S. exports to the EU took effect.

"This is on top of the closings of restaurants, bars, and distillery and winery tasting rooms because of the COVID-19 pandemic," the groups wrote. Still, spirit sales rose in 2020 as producers utilized channels such as curbside delivery and direct-to-consumer shipping.

The long-term suspension of tariffs related to the Airbus-Boeing dispute brings some financial relief to procurement leaders in the industry, who will no longer need to factor in a 25% tariff into imports costs.

The end of the civil aircraft dispute comes following negotiations between U.S. Trade Representative Katherine Tai and European Commission Executive Vice-President Valdis Dombrovskis.

At Tai's confirmation hearing in February, Sen. Bob Menendez, D-NJ, asked if addressing the tariffs would be a priority, noting the hardship on food importers.

"Those tariffs have been devastating to food importers and restaurants in New Jersey, struggling particularly due to the pandemic, they can ill afford to have increased costs at a time like this," Menendez said.

Tai, in her response, said the tariffs are part of the larger aircraft dispute that require the U.S. and EU to figure out an answer together.

"You inflict pain on each other's stakeholders to try to motivate each other to come to a resolution," Tai said.

Although the trade blocs have reached a resolution on the aircraft dispute, the tariff suspension does not allow spirit importers and exporters to completely emerge from the woods.

The Distilled Spirits Council noted that the EU and U.K. continue to impose 25% tariffs on American whiskey exports, which are part of a separate trade dispute over steel and aluminum.

Since the tariffs began, U.S. exports of whiskey to the EU fell 37%, the council said in a statement Tuesday.