11 October 2019

Trump’s EU tariffs will harm all involved

by IFT

While the United States’ planned tariffs are a legal, WTO-sanctioned retaliation for EU Airbus subsidies, their effects will be extremely deleterious to the British, European, and American economies.

The tariffs are scheduled to enter into force on October 18, before which both sides have an opportunity to negotiate their avoidance. At present, they will affect $7.5bn of goods from the EU; and the United Kingdom is forecast to be the hardest hit, with annual losses predicted at $1.4bn.

In response, the EU have proposed applying tariffs on $20 billion of goods from the US, under its own WTO case against the US’ subsidising of Boeing.

Although the tariffs are permitted against the entire EU, the US has specifically singled out certain EU countries on certain products:

- For aircraft, “the Airbus countries” (UK, France, Germany, Spain) will face 10% tariffs.

- Most EU countries will face 25% on foodstuffs including cheeses, olives and pork products.

- Exclusively focusing on Germany and the UK, 25% tariffs are levied on a variety of products including, biscuits, books, and construction machinery.

- And finally, a set of tariffs are scheduled to exclusively target the United Kingdom, including import duties of 25% on single malt whiskies (which will “shoulder 62 per cent of the duties hitting British products”); bed linens; and various kinds of apparel including suits, pyjamas, and outdoor clothing.

The damage this could do to the UK is amplified by the importance of the US as the UK’s largest export destination. And the high-end UK product lines have been carefully selected by USTR. The Guardian reported that the trade group Walpole (representing over 250 luxury British brands) name the US as their primary export market.

Secretary of State for Scotland, David Mundell, is pushing for an offer to unilaterally scrap tariffs on certain US products post-Brexit, in order to help encourage reciprocation for the Whisky sector.

Tariffs are a tax on consumers. As well as the loss in sales that UK exporters can expect, US consumers will bear the brunt of these tariffs in the form of higher prices; as will US business which depend on their quality. Likewise, if the EU follows through with their proposed revenge tariffs, the spat will hit European consumers and American exporters as well.

No-one wins a trade war.