The EU and America – A New Trade War?

Within the UK, the term ‘tariffs’ immediately gets people thinking about Brexit and how a no-deal Brexit will see them drive up prices for businesses, and though this is where much of the focus is, that could change by the end of the month.

Putting an end to a long-running dispute, the WTO has found that the EU had breached rules when providing support to Airbus. As a result, it means that the US government can now impose tariffs of 25% on goods imported from the EU, worth up to $7.5 billion a year. This is the largest amount the WTO has ever authorised.

The US Trade Representative’s Office stated its intent to implement these tariffs swiftly and the aim is to have them in place by 18th October. Such an approach would be consistent with the Trump administration’s ‘America First’ approach to international trade and foreign policy.

These tariffs will affect a range of different products exported by many different EU states such as the UK, the Republic of Ireland, France, Germany and Spain amongst others. The list of products was published by the US Trade Representative’s Office included scotch whiskey, woollen products, bed linen and blankets and olive oil amongst others.

Despite this though, it is expected that the US government will avoid applying them in full immediately. The US is already in the midst of a trade war with China and opting to engage in one with the EU at a time when Brexit will be their top priority could further damage US-EU relations.

A key factor in any decision will be the WTO passing judgement on a similar case next year. The WTO are expected to find that the US government illegally provided support to Boeing, which would allow the EU to implement similar tariffs. The EU’s Trade Commissioner, Cecilia Malmstrom said that a US decision to put the tariffs in place would be ‘short-sighted and counterproductive’.

There is still a chance for the tariffs to be avoided altogether. The EU and the US are still yet to sit down, discuss the issue and reach a settlement. Many companies and politicians believe that this should be the priority in order to avoid a further escalation of trade tensions and the risks it poses to the global economy.

Robert McConnell, Pinnacle Professional