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US companies split on backing for proposed EU tariffs

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US companies split on backing for proposed EU tariffs

A host of producers and importers of copper, liquor and dairy products lobbied the Trump administration Aug. 5 both for against and its proposed tariffs in the U.S.-European Union aircraft subsidy spat that is showing no signs of abating.

The U.S. Trade Representative's Office on July 1 proposed additional tariffs of up to 100% on roughly $4 billion of imports from the EU, including metals, whiskey, pasta, cheese and olives amid a conflict where both sides have accused one another of providing unfair subsidies to their respective large aircraft producers, Boeing Co. and Airbus SE.

The Distilled Spirits Council of the United States, a trade group that represents 60% of the spirits sold in the U.S. and 75% of U.S. spirits exports, told the U.S. interagency Section 301 Committee on Aug. 5 at a public hearing on the proposed tariffs that the tariffs, if implemented, could likely in turn actually harm U.S. liquor producers.

Chris Swonger, the group's president and CEO, said that the EU, which imposed a 25% tariff on U.S. whiskey exports in June 2018, is the largest export market for U.S. distilled spirits. A tariff by the U.S. could lead the EU to respond with another retaliatory tariff on U.S. spirits, which he said puts at risk anywhere from 11,200-78,600 U.S. jobs.

According to Panjiva, a trade-related division of S&P Global Inc., the total value of the 89 products targeted for the year ended April 30 is closer to $4.7 billion than the $4 billion cited by the U.S., with whiskey, at $2.16 billion, leading the way in total value. British-based distiller Diageo PLC would be particularly at risk from the tariffs, as could whiskey imported from France-based Pernod Ricard SA.

Harm to US companies

"Tariffs imposed on the EU may only appear to harm EU companies," Swonger told the committee, which includes officials from federal departments including State, Agriculture and Treasury, as well as the U.S. Trade Representative's Office. "This is simply not the case."

The proposed tariffs on $4 billion of EU goods are in addition to the roughly $21 billion of imports from the EU that have already been targeted in the aircraft subsidy spat. That larger tranche includes aerospace goods, food, apparel and handbags.

The quarrel dates back to 2004, when the U.S. first brought a challenge to the World Trade Organization alleging that the EU was unfairly subsidizing, a claim confirmed by the WTO more than a decade later, leading the U.S. to request countermeasures against the trading bloc.

However, as has been the case in the trade spats picked by the Trump administration with other trading partners including China, Canada and Mexico, U.S. sectors without a stake in the fight have been roped in through retaliatory tariffs. This includes importers of cheese and other dairy products.

Robert Stang, representing the Cheese Importers Association of America, a trade group, cautioned the Trump administration that U.S. wholesalers, retailers, restaurants, consumers and truck drivers would all be burdened from the tariffs, leading to job losses and higher prices for consumers.

Tariff support

However, the National Milk Producers Federation came out in support of the tariffs, which they said would help level a playing field with the EU due its tariff and non-tariff barriers to U.S. cheese exports. The U.S. runs a roughly $1 billion cheese trade deficit with the EU, the group noted.

Several firms told the committee that a host of products made in the U.S., including electronics and semiconductors as well as cars made by General Motors Co. and Ford are all at risk from proposed tariffs on copper and copper alloy imports from the EU.

John Shay, president of KME America Inc., the Illinois-based division of the German copper and copper alloy producer, said the tariffs would “send a shockwave throughout the economy,” adding that the tariffs could spike the prices of products his company's components go into.

"Consider the hundreds of millions of cars on the road," Shay said. "Each day in some way our metals touch the lives of each person in this room."

However, Brian O'Shaughnessy, chairman for Revere Copper, said his company is in favor of the tariffs because he said they will cause European competitors to pressure their government to stop what he called "wrongful" subsidies of European aviation.

"The EU has contributed mightily to fabricated glass decline in the U.S.," O'Shaughnessy told the panel. "Protective tariffs ... are critical to national security."

Despite the ongoing trade tension associated with the aircraft spat, the U.S. and EU signed an agreement at the White House on Aug. 2 that nearly triples the EU's annual duty-free purchases of U.S. beef.

The two sides in October 2018 opened up formal negotiations toward a bilateral trade deal, though progress has been slowed amid hang-ups over differences regarding agriculture and the looming threat of 25% tariffs by the Trump administration on imports of vehicles, including those from the EU.