On Monday, October 14, 2019, the World Trade Organization (WTO) gave the Trump Administration permission to proceed with imposing punitive tariffs on a record $7.5 billion worth of European Union goods. The new tariffs come into effect on October 18 and will apply to a variety of consumer goods, from French wines to Italian cheeses to olive oil.
Tariffs will most likely be felt strongest across the food and beverage industry, from European producers and exporters, to American restaurants, grocery stores, and eventually consumers.
The decision was expected after the WTO issued a long-awaited ruling on October 2 regarding a 15-year old dispute between the United States and the European Union. The U.S. had protested that European countries, including Britain, France, Germany, and Spain, engaged in unfair practices by providing financial subsidies for Airbus in a way that hurt Boeing sales in Europe. The WTO finally handed down the final decision in that case, which authorized the tariffs at least until the E.U. ends its subsidies.
The full list of products impacted by the retaliatory tariffs is available on the Federal Register’s website. Aircraft will be subject to a 10 percent tariff, while most other goods, including Italian cheeses, French wines not over 14 percent alcohol by volume, olive oil, and German sausage, Irish and Scotch Whiskies, and many more will be subject to 25 percent duties.
While trade experts argued the U.S. was justified in imposing these sanctions, some American companies and consumers will undoubtedly feel an economic impact, including liquor importers, grocery stores, specialty wine shops, restaurants, and other businesses that use or import the targeted European products. Regarding French wines, for example, the president of the Federation of French Wine and Spirits Exporters expects the tariffs to raise the retail price of French wines sold in the U.S. by up to 30 percent.
In a separate case, the WTO is considering similar allegations made by the EU against the U.S. for subsidizing Boeing sales. A decision is expected early next year and could result in tariffs on up to $20 billion worth of American products, including food and agricultural goods.
As farmers and agricultural producers have already expressed frustration about seeing their industry hit as a result of a dispute over aircraft subsidies, both blocks are likely to face pressure to find a solution quickly. In the meantime, American consumers and businesses should expect to see rising prices around the middle of December, as products imported before October 18 sell through and are replaced by newly imported products subject to the tariffs.