Despite a continuing 17 month-long trade war against China, the Trump administration is about to launch a new trade war -- this time against the European Union (EU), the largest export market for U.S. products in 2018. The EU is also the second largest source of imports into the U.S.
The EU has repeatedly said it will retaliate in kind against new U.S. tariffs levied against its goods. Proposed Trump tariffs on some EU goods will be much harsher than those imposed on China. Some of these tariffs will reach 100%. In contrast, the maximum tariffs imposed by the Trump administration against China was 25%.
Analysts said the Trump administration is apparently using its recent arbitration victory against Airbus SE over illegal EU subsidies as a pretext for hiking tariffs on a wide range of EU exports to the U.S.
The U.S. is weighing tariffs of up to 100% on European products previously left untouched by these duties. Among the EU exports to the U.S. to be levied 100% tariffs are Irish and Scotch whiskies and Cognac.
The Office of the United States Trade Representative (USTR) on Dec. 12 published a list of additional European products it's now considering tariff targets due to the Airbus episode. Earlier this year, USTR published multiple lists of European goods worth more than $10 billion it plans to target in response to the U.S. case against Airbus and the EU.
In October, the Trump administration imposed tariffs of 10% on large civil aircraft and 25% on agricultural goods from Europe.
"As a result of the EU's failure to address these subsidies, on October 18, the United States imposed tariffs of 10 percent on large civil aircraft and 25 percent on agricultural and other products" from the EU, wrote USTR on Dec. 2.
Due to the EU's failure to curb the subsidies, "the United States is initiating a process to assess increasing the tariff rates and subjecting additional EU products to the tariffs."
USTR plans to solicit advice on whether to hike hikes tariffs on those goods up to 100%. It also plans to expand its initial list by adding some goods the White House had excluded from its final October list. The new items might also be taxed at a rate up to 100%.
Among the many new products under consideration include European spirits such as whiskey and Cognac, Spanish olive oil, French cheese, German knives and Portuguese fish fillets
The potential list "once again includes blended whiskies and Cognac ... The fact that they had been excluded from the 'final' October list was a dodged bullet for Spirits companies back then. But now the threat is back," wrote Trevor Stirling and analyst of AllianceBernstein in a note to the brokerage's clients.
"This is a full reshuffle -- we are potentially seeing a rolling tariff, which we highlighted as a possibility two months ago."
USTR data shows the EU countries ranked 1st as an export market for the United States in 2018. U.S. goods exports to the EU in 2018 amounted to $318.6 billion, a jump of 12.5% ($35.4 billion) from 2017 and up 17.0% from 2008. U.S. exports to EU accounted for 19.1% of overall U.S. exports in 2018.
The top export categories in 2018 were aircraft ($46.5 billion), machinery ($34.2 billion), mineral fuel (oil) ($28.5 billion), optical and medical instruments ($27.7 billion) and pharmaceuticals ($26.6 billion).
On the other hand, the EU countries ranked as the 2nd largest supplier of imports to the United States in 2018. U.S. goods imports from EU countries in 2018 came to $487.9 billion, up 12.3% ($53.3 billion) from 2017, and up 32.6% from 2008. U.S. imports from EU countries accounted for 19.2% of overall U.S. imports in 2018.
The top import categories in 2018 were: machinery ($80.2 billion), pharmaceuticals ($71.9 billion), vehicles ($56.4 billion), optical and medical instruments ($32.3 billion) and electrical machinery ($28.1 billion).
