Just When You Thought It Was Safe, Tariff Man Strikes Again, Threatens Duties On $4 Billion In EU Goods

Just When You Thought It Was Safe, Tariff Man Strikes Again, Threatens Duties On $4 Billion In EU Goods

Now that tariffs on the remaining $325 billion in Chinese imports have been postponed pending renewed negotiations with Beijing, Donald Trump is free to pivot to Europe.

On Monday evening, following a good day for global equities which rallied on hopes that the Osaka truce and Huawei relent together mark a turning point in relations between the world’s two largest economies, the USTR was back at it, proposing additional tariffs on a supplemental list of European goods with a trade value of roughly $4 billion.

The excuse: The US needs to “enforce its rights” in the WTO dispute against the EU over subsidies on large civilian aircraft.

Long story short, this is the Airbus issue rearing its ugly head. The dispute popped up in April, much to the chagrin of markets, which by that time had decided that the worst of the trade war was probably behind us, even as the specter of auto tariffs was still casting a pall over the outlook for the European economy.

The 14-year-old Airbus spat had been adjudicated at the WTO, but according to Bob Lighthizer, the “time for action” had come. And so, the US released a list of EU products — everything from aircraft to cheese to frozen swordfish fillets — that would be subject to duties under Section 301. The USTR cited a 2018 appellate report on the harm caused by “launch aid” for Airbus which apparently “caused significant lost sales to Boeing 787 and 747 aircraft, as well as lost market share for Boeing very large aircraft in the EU, Australia, China, Korea, Singapore, and UAE markets.”

Read more on the Airbus dispute

Fast forward three months (give or take) and Lighthizer is out with an update. Here it is:

Today, the Office of the U.S. Trade Representative is issuing for public comment a supplemental list of products that could potentially be subject to additional duties in order to enforce U.S. rights in the World Trade Organization (WTO) dispute against the European Union (EU) and certain EU member States regarding EU subsidies on large civil aircraft. 

This supplemental list adds 89 tariff subheadings with an approximate trade value of $4 billion to the initial list published on April 12, which included tariff subheadings with an approximate trade value of $21 billion. USTR is adding to the initial list with the supplemental list in response to public comments and additional analysis. 

In the event the Arbitrator issues its decision prior to completion of the public comment process on the supplemental list, the USTR may immediately impose increased duties on the products included in the initial list, and take further possible actions with respect to products on the supplemental list. 

The supplemental list, as well as the schedule for a public hearing and written comments, are set out in a notice that will be published shortly in the Federal Register. 

The supplemental list includes items like “frozen hams, shoulders and cuts thereof”, “mixtures of two or more fruits”, coffee, uncooked pasta, cherry juice, whiskey, cast iron and “ammonia in aqueous solution”.

“[This is a] risk-off surprise”, remarked Kyosuke Suzuki, head of FX and money-market sales at SocGen in Tokyo.

Only not really. Rather, this is a pattern. Trump has a penchant for ratcheting up the pressure on Europe when tensions with China abate and vice versa. The White House has employed this same tactic on a number of occasions. Here’s what we wrote in April, when the Airbus issue last roiled markets:

Arguably, the biggest problem with Trump’s Airbus “grandstanding” is that it comes at a time when many observers believe the US president will immediately pivot to the EU once a trade truce with Beijing is finally struck. Trump has dangled the threat of auto tariffs over the bloc for a year and it’s still not clear exactly what he plans to do in that regard.

Less than a month later, Trump restarted the trade war with China. Now that the administration has deescalated that situation, the president has predictably pivoted to the EU – again.

In April, Lighthizer claimed the “ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.” At the time, the EU said it would likely retaliate, and it’s safe to assume that this new irritant will only complicate efforts to negotiate some kind of agreement that forestalls auto tariffs.

Remember, talks around the proposed car duties have gone absolutely nowhere since Trump agreed to a six-month delay in May. By some accounts, it is literally impossible to negotiate a comprehensive trade deal with Europe in less than two years.

Read a full account of where trade talks with the EU stand

You can read the full backstory on the Airbus dispute in the first linked post above. While it’s not clear whether the supplemental list published by the USTR on Monday evening will ultimately cause a stir, it is, at the very least, an unwelcome reminder that ceasefires and truces notwithstanding, Donald Trump is still “a tariff man”.

Supplemental list from the USTR


5 thoughts on “Just When You Thought It Was Safe, Tariff Man Strikes Again, Threatens Duties On $4 Billion In EU Goods

      1. Thanks for the link. Too bad Trump doesn’t read briefing memo’s, let alone anything on economics or how the real economy works. If it’s not on Fox News (Trump’s PRAVDA), the stable genius will never know about it.

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