A Whisky Rebellion Is Brewing: European Businesses Protest the Latest Round of U.S. Tariffs
A U.S. plan to impose tariffs on billions of dollars worth of European imports drew cries of pain from sectors ranging from Scotch whisky makers to Spanish farmers on Thursday as the threat of a transatlantic trade war added to jitters over global growth.
After winning authorization from the World Trade Organization on Wednesday to impose extra import duties on $7.5 billion of European products in a long-running dispute over illegal government subsidies for European aircraft maker Airbus, the Trump Administration moved quickly to issue a list of European products to target with new tariffs beginning October 18th.
They range from aircraft to clothes, wine, Scotch whisky, olives and cheese. The harshest sanctions hit Britain, France, Germany and Spain—the members of the consortium that makes Airbus airliners—but howls of protest could be heard from Italy to Ireland.
The measures will make a wide range of European products more costly for American consumers and increase uncertainty over world economic growth at a time when the Trump administration is locked in an escalating trade war with China.
Making matters worse, the EU is seeking WTO approval to impose tariffs on billions of dollars of U.S. exports in a parallel dispute over subsidies to Boeing, Airbus’s rival for domination of the world aircraft market. It has said it could be forced to impose its own tariffs next year if the United States goes ahead with its threat.
The U.S. government chose to impose tariffs of 10% on imports of Airbus and other European aircraft and duties of 25% on the other products. Some pork products, cheese, butter and yogurt from various European nations will be affected, but a previous threat to include leather products was rescinded, sparing the European luxury goods sector.
U.S. President Donald Trump said on Twitter that the WTO ruling was “a nice victory”, adding the European Union had for many years treated the U.S. very badly on trade.
The U.S. Trade Representative’s Office said “massive EU corporate welfare” had cost American aerospace companies hundreds of billions of dollars in lost revenue over the nearly 15 years that the WTO dispute over aircraft subsidies has rumbled on.
In a statement announcing the new tariffs, U.S. Trade Representative Robert Lighthizer also said, “we expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”
The 28-nation European Union said it regretted the U.S. decision.
“This is a move that will first and foremost hit U.S. consumers and companies and will make efforts towards a negotiated settlement more complicated,” trade spokesman Daniel Rosario told the daily briefing of the EU’s executive Commission.
“The European Commission has consistently communicated to the United States that the EU is ready to work together on a fair and balanced solution for our respective aircraft industries … If the U.S. imposes counter-measures (tariffs), it will be pushing the EU into a situation where it will have to do the same,” he said.
The extra 25% duties will apply, among other items, to sweaters, men’s suits and single-malt Irish and Scotch whiskies exported from the U.K., roasted coffee and a range of tools from Germany, and olives and wine from France, Germany, Spain and the U.K.
Karen Betts, chief executive of the Scotch Whisky Association, said whisky producers were very disappointed at the U.S. decision, calling it “a blow to the Scotch whisky industry.”
“Despite the fact that this dispute is about aircraft subsidies, our sector has been hit hard, with single malt Scotch whisky representing over half of the total value of U.K. products on the U.S. government tariff list,” she said, amounting to over $460 million.
“The tariff will undoubtedly damage the Scotch whisky sector. The U.S. is our largest and most valuable single market, and over £1 billion”—$1.24 billion—“of Scotch Whisky was exported there last year,” she said.
She urged the EU and United States to take urgent action to de-escalate the dispute to ensure that the threatened new tariffs were not implemented.
A spokesperson for Diageo, a major Scotch whisky producer, told Fortune it was still assessing the impact of the U.S. announcement.
Spanish agricultural association COAG, meanwhile, said the new tariffs would affect nearly one billion euros($1.1 billion) worth of Spanish farm exports to the United States, including olives, olive oil, wine and cheese.
COAG Secretary-General Miguel Blanco said it was “completely unfair and disproportionate” that the Spanish farming sector should be hit by an EU trade war that had nothing to do with the Spanish countryside.
“We demand the EU authorities and Spanish government protect the interests of our farming sector with a rapid and balanced solution to avoid this conflict handing a new and costly bill to our farmers and ranchers,” he said in a statement.
U.S. airline Delta Air Lines, a major customer for Airbus aircraft, also voiced concerns over the threat of new tariffs.
“Aircraft are significant purchases requiring long lead times for production—often years in advance. Imposing tariffs on aircraft that U.S. companies have already committed to will inflict serious harm on U.S. airlines, the millions of Americans they employ and the traveling public,” Delta said in a statement.
Airbus, the target of the original complaint, said after Wednesday’s WTO ruling that if the United States imposed import tariffs on aircraft, it would “create insecurity and disruption not only to the aerospace industry, but also to the broader global economy.”
“Airbus will continue working with its U.S. partners, customers and suppliers, to address all potential consequences of such tariffs that would be a barrier against free trade and would have a negative impact on not only the U.S. airlines but also U.S. jobs, suppliers, and air travelers. Airbus is therefore hopeful that the U.S. and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy,” Airbus CEO Guillaume Faury said in a statement.
The British government weighed in as well, saying that “resorting to tariffs is not in the interests of the UK, EU or U.S. We are working closely with the U.S., EU and European partners to support a negotiated settlement to the Airbus and Boeing disputes.”
The U.S. tariffs would be a blow to the U.K. government, which has set great store on achieving a free trade agreement with the United States once it leaves the EU.
During the long-running trade dispute, the WTO had already found that both Airbus and U.S. rival Boeing have benefited from unfair subsidies. The disputes were over cheap government loans for Airbus and Washington state tax credits for Boeing.
In April, the EU published its own list of $20 billion of U.S. exports to the EU, including aircraft, chemicals, frozen fish, citrus fruits and ketchup, some of which it could choose to hit with tariffs over the Boeing dispute if it gets the WTO green light to do so.
The one time strong trading partners have been trading threats on new tariffs and taxes for much of the Trump presidency. The president has threatened to retaliate against a French tax on internet companies by imposing a tax on French wine. He has also repeatedly threatened to impose import tariffs on European cars.
The World Trade Organization on Tuesday downgraded its global growth outlook for this year and next, citing escalating trade tensions and slowing economies.
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