Outside the Beltway

Trump Administration Set To Raise Tariffs On European Alcohol And Food Products

The Trump Administration is set to raise tariffs on more products from Europe, including Scotch Whisky and other alcoholic beverages as well as food products and other items.

Doug Mataconis · Tuesday, July 9, 2019 · 9 comments

The Trump Administration is threatening to raise additional tariffs against products from the European Union, including products such as Scotch Whisky, gin, and other alcoholic beverages and food products:

WASHINGTON (Reuters) – Just days after reaching a truce in the U.S.-China trade war, the U.S. government on Monday ratcheted up pressure on Europe in a long-running dispute over aircraft subsidies, threatening tariffs on $4 billion of additional EU goods.

The U.S. Trade Representative’s office released a list of additional products – including olives, Italian cheese and Scotch whiskey – that could be hit with tariffs, on top of products worth $21 billion that were announced in April.

USTR said it was adding 89 tariff sub-categories to its initial list, including a variety of metals, in response to public comments, but gave no further explanation. Over 40 individuals testified about products included on the initial list at a public hearing on May 15 and 16.

The United States and the EU have threatened to impose billions of dollars of tit-for-tat tariffs on planes, tractors and food in a nearly 15-year dispute at the World Trade Organization over aircraft subsidies given to U.S. planemaker Boeing Co and its European rival, Airbus SE

(…)

The Distilled Spirits Council of the United States criticized the Trump administration’s latest tariff threats and warned they would jeopardize U.S. jobs and hurt consumers.

“We strongly oppose the inclusion of distilled products in the proposed retaliation list,” said spokeswoman Lisa Hawkins.

“U.S. companies – from farmers to suppliers to retailers – are already being negatively impacted by the imposition of retaliatory tariffs by key trading partners on certain U.S. distilled spirits … and these additional tariffs will only inflict further harm,” she said.

Unlike the tariffs that the Trump Administration has been imposing since last year, these proposed tariffs appear to be directed at a more long-standing dispute between the United States and the European Union. Specifically, the United States has long objected to the subsidies that Airbus receives from the E.U. and various European governments especially to the extent that it gives the European aircraft manufacturer an alleged competitive advantage over Boeing, the largest commercial airplane manufacturer in the United States. This dispute pre-dates the Trump Administration, but previous Administrations have refrained from using the tariff authority to raises tariffs on goods unrelated to the airline industry, which is what the Office of the Trade Representative is proposing to do now. Additionally, as the article linked above notes, Boeing itself is the recipient of substantial tax benefits from the State of Washington not to mention the fact that its contracts with the Federal Government for defense-related aircraft and, of course, Air Force One, both of which are substantial sources of revenue for the company. These state-level tax benefits are apparently the subject of a dispute currently pending before the World Trade Organization, which could rule on the matter sometime in the next two to three months.

Even if you accept the argument that the subsidies to Airbus, or Boeing for that matter, constitute an unfair trade practice under the WTO, the tariffs that the Trump Administration is proposing hear make absolutely no sense whatsoever. As with all such tariffs, they will ultimately raise prices for consumers, in this particular case consumers of everything from alcoholic beverages such as whisky from Scotland and gin from England to olives (can we call this a martini tax then?) as well as prices for certain non-consumer goods that are used by American businesses in their manufacturing process. This is, of course, contrary to the ill-informed and economically ignorant clams of the President that tariffs are paid by foreign businesses, or even by foreign governments, and that they end up benefiting the United States because they lead to increased revenue. As I’ve said before, tariffs are taxes, in this case particularly regressive taxes that will likely burden middle and lower class consumers disproportionately, and they will ultimately be paid by those consumers. This is why economists on both sides of the ideological divide are nearly unanimous in their arguments against tariffs.

None of this matters to the President, of course. He continues to believe that trade wars are good and easy to win despite all of the evidence to the contrary. His tariffs on foreign steel and aluminum, for example, have raised prices for durable goods and automobiles, and the retaliatory tariffs that China have imposed in the ongoing trade dispute between Washington and Beijing have hit the American agriculture industry particularly hard. If these tariffs are allowed to go into effect, the Europeans will no doubt retaliate and consumers and business owners on both sides of the Atlantic will be hurt as a result. Indeed, as the chickens from Trump’s trade war come home to roost we are beginning to see the consequences of these ill-advised policies. Letting these new tariffs go into effect would just make the damage worse.