European Union – U.S. trade dispute escalates as E.U. issues retaliatory tariffs on a number of iconic American goods

President Trump’s new tariffs on steel and aluminum sparked a response from the EU, issuing retaliatory tariffs on a number of iconic American goods.

This Friday the European Union began imposing punitive tariffs valued at 2.8 billion EUR against imports from the United States, in response to President Trump’s recent tariffs on imported steel and aluminum. The EU tariff calculation was based upon the 6.4 billion EUR in tariffs that the US levied against EU steel and aluminium exports to the US.

EU adopts rebalancing measures in reaction to US steel/aluminium tariffs. Measures will come into effect on Friday 22 June, targeting products worth €2.8 billion. https://t.co/sbZMflo6GA

— Daniel Rosario (@danielrosarioEU) June 20, 2018

In an act of tit-for-tat, the European Commission stated that the outstanding balance of 3.6 billion EUR will be implemented at a later stage. The list of American products hit by the new tariffs includes steel, aluminium and agriculture products.

The Commissioner for Trade, Cecilia Malmström, said in the Commission’s original press release:

“We did not want to be in this position. However, the unilateral and unjustified decision of the US to impose steel and aluminium tariffs on the EU means that we are left with no other choice. The rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side. Our response is measured, proportionate and fully in line with WTO rules. Needless to say, if the US removes its tariffs, our measures will also be removed.”

On Friday President Trump threatened, via Twitter, to impose a 20 percent tariff on all imports of EU-assembled cars.

Based on the Tariffs and Trade Barriers long placed on the U.S. & its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!

— Donald J. Trump (@realDonaldTrump) June 23, 2018

Vice President of the European Commission, Jyrki Katainen told the French newspaper Le Monde, “We have chosen products with high impact, economic and political.” Mr. Katainen stated, “The members of the US Congress, of both parties, do not necessarily share the views of the president, just like the private sector. Once the measures begin to take effect, the pressure will go up.” Katainen added that if President Trump applies new tariffs to European cars, the EU “again, would have no choice but to react.”

Items that will see an increased 25% import duty include:

-Corn in different forms
-Beans
-Rice in different forms
-Peanut butter
-Orange Juice
-Bourbon whiskey (such as Jack Daniels and Jim Beam)
-Tobacco products
-Cosmetics
-Cotton t-shirts
-Jeans
-Steel and aluminium products, such as pipes, steel tanks, nuts and plates
-Motorcycles in the “heavyweight class” (such as Harley Davidsons)
-US made leisure boats
-Playing Cards, table games for casinos, and certain video games

Europeans who enjoy traditional American staples, like blue jeans, Jack Daniels, Marlboros, Harley Davidson and a game of poker will see a 25% price surge for these pleasures.

The majority of the goods that fall under the new tariffs are produced in traditionally “red states” in the US, which is seen as a way for the Commission to put a degree of pressure on the Republican party to seek a way to prevent the looming trade war between the EU, US and possibly China from genuinely erupting.

In an interview this week, Kentucky governor Matt Bevin called the tariffs a “money grab” by the EU, seeking to downplay fears the tariffs could impact distillers in Kentucky, by referring to Europe as a “small portion” of the bourbon market. Kentucky produces about 95 percent of the world’s bourbon.

The Kentucky Distillers’ Association, however, refuted the assertion saying that EU countries accounted for nearly $200 million of the more than $450 million in total exports of Kentucky bourbon and other distilled spirits in 2017, and that duties on American whiskey would have a “significant impact” on investment and employment in the state’s $8.5 billion bourbon sector. In a statement released by the association this week:

“As we have said for the past few months, there are no winners in a trade war, only casualties and consequences. The KDA and its members believe that tariffs and retaliatory measures will have a significant impact on Bourbon investment, employment and economic growth throughout the Commonwealth … An extended trade war would not only harm our iconic industry, but also Kentucky’s farm families, cooperages, glass and other suppliers, hospitality and tourism partners, and ultimately, our loyal consumers through higher prices and limited availability.”

An internal EU memo obtained by Bloomberg disputed President Trump’s conclusion that the EU should be punished because of unfair trade practices. The memo cites that the US maintained a surplus in services trade with the EU of $45 billion in 2017, and that including trade in goods, services and primary income from investments, the US actually runs a 12 billion euro surplus with the EU. The memo adds that the EU is the largest investor in the US, accounting for 72 percent of inward foreign direct investment.

By John Sjoholm, LIMA CHARLIE NEWS

John Sjoholm is Lima Charlie’s Middle East Bureau Chief, Managing Editor, and founder of the consulting firm Erudite Group. A seasoned expert on Middle East and North Africa matters, he has a background in security contracting and has served as a geopolitical advisor to regional leaders. He was educated in religion and languages in Sana’a, Yemen, and Cairo, Egypt, and has lived in the region since 2005, contributing to numerous Western-supported stabilisation projects. He currently resides in Jordan. Follow John on Twitter @JohnSjoholmLC

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