European Union set to slap tariffs on US goods

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European Union set to slap tariffs on US goods

Economists worry about a trade war between the United States and its most vital trading partners.


Tariffs will be imposed on goods ranging from bikes to whiskey (Steve Helber/AP)
Tariffs will be imposed on goods ranging from bikes to whiskey (Steve Helber/AP)

The European Union is set to slap tariffs on 3.4 billion dollars (£2.5 billion) in American products on Friday, from whiskey and motorcycles to peanuts and cranberries.

India and Turkey have already targeted US products, ranging from rice to autos to sunscreen.

The United States attacked first, imposing tariffs on steel and aluminium from around the globe and threatening to hit tens of billions of dollars in Chinese products.

Now, the world is punching back.

But the highest-stakes fight still looms – in two weeks, the United States is to start taxing 34 billion dollars (£25 billion) in Chinese goods.

Beijing has vowed to immediately retaliate with its own tariffs on US soybeans and other farm products in a direct shot at President Donald Trump’s supporters in America’s heartland.

The tit-for-tat conflict between the United States and China, the world’s two largest economies, is poised to escalate from there. The rhetoric is already intensifying.

“We oppose the act of extreme pressure and blackmail by swinging the big stick of trade protectionism,” a spokesman for China’s Commerce Ministry said Thursday.

“The US is abusing the tariff methods and starting trade wars all around the world.”

Cecilia Malmstrom, the EU’s trade commissioner, acknowledged that the EU had targeted some iconic American imports for tariffs, like Harley-Davidson motorcycles and bourbon, to “make noise” and put pressure on US leaders.

John Murphy, a senior vice president at the US Chamber of Commerce, estimates that 75 billion dollars (£56 billion) in US products will be subject to new foreign tariffs by the end of the first week of July.

“We’ve never seen anything like this,” said Mary Lovely, a Syracuse University economist who studies international trade — at least not since countries tried to wall themselves off from foreign competition during the Great Depression.

Those personally in the line of fire are among the most concerned.

“It will be a disaster,” said Nagesh Balusu, manager of the Salt Whisky Bar and Dining Room in London, expects the EU’s tariffs to add more than seven dollars (£5.26) to the price of a bottle of Jack Daniel’s, which is imported from Tennessee.

“It’s going to hit customers, that’s for sure. How they’ll take it, we’ll have to wait and see.”

As painful as the brewing trade war could prove, many have seen it coming.

Trump ran for the presidency on a vow to topple seven decades of American policy that had favoured ever-freer trade among nations.

He said that a succession of poorly negotiated accords — including the North American Free Trade Agreement and the pact that admitted China into the World Trade Organisation — put American manufacturers at an unfair disadvantage and destroyed millions of US factory jobs.

He pledged to impose tariffs on imports from countries that Trump said had exploited the United States.

Late last month, Trump proceeded to infuriate US allies, from the EU to Canada and Mexico, by imposing tariffs of 25% on imported steel and 10% on aluminium.

The president justified the move by saying imported metals threatened America’s national security, a dubious justification that countries have used rarely because it can be so easily abused.

And he is threatening to impose another national security-based tariff on imports of cars, lorries and car parts.

Trump has also started a trade fight with China over Beijing’s sharp-elbowed efforts to overtake US technological dominance.

The White House last week announced plans to slap 25% tariffs on 1,100 Chinese goods, worth 50 billion dollars (£38 billion) in imports.

Trump would start July 6 by taxing 34 billion dollars worth of products and later add tariffs on an additional 16 billion (£12 billion) in goods.

The Chinese have said they will respond in kind.

Trump said he would then retaliate against any counterpunch from Beijing by targeting an additional 200 billion dollars (£150 billion) in Chinese products, and then yet another 200 billion dollars if China refused to back down.

All told, the 450 billion dollars (£339 billion) in potential tariffs would cover nearly 90% of goods China sends to the United States.

The tariffs and threats have begun to take a toll. Steel and aluminium prices, for example, have shot up and supplies have become scarce.

“Steel pricing is usually relatively stable,” said Al Rheinnecker, chief executive of American Piping Products in Chesterfield, Missouri, which distributes steel pipe to numerous industries.

But “since April, you can quote something on Monday, and if the customer doesn’t buy it right away, you may have to raise the price on Thursday.”

The Commerce Department is allowing companies to request exemptions from the steel and aluminium tariffs, if they can show that the metals they need are not available from American producers.

The department expected 4,500 requests. But it has been overwhelmed by more than 20,000. This week, it said it has processed just 98 requests so far, approving 42 and denying 56.

Economists and trade analysts worry that there may be no way out of an all-out trade war between the United States and its most vital trading partners.

“The president has been so belligerent that it becomes almost impossible for democratically elected leaders, or even a non-democratic leader like (Chinese president) Xi Jinping, to appear to kowtow and give in,” said Philip Levy, senior fellow at the Chicago Council on Global Affairs and a former White House trade adviser.

“The president has made it very hard for other countries to give him what he wants.”

Press Association

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