EU Raises Stakes for Trump by Aiming Levies at GOP Heartland

• Tit-for-tat tariff of 25% to hit $3.5 billion of U.S. goods
• Retaliatory list includes jeans, cosmetics, bourbon, boats

 

 

 

The European Union is preparing punitive tariffs on iconic U.S. brands produced in key Republican constituencies, raising political pressure on President Donald Trump to ditch his plan for taxing steel imports.

Targeting 2.8 billion euros ($3.5 billion) of American goods, the EU aims to apply a 25 percent tit-for-tat levy on a range of consumer, agricultural and steel products imported from the U.S. if Trump follows through on his tariff threat, according to a list drawn up by the European Commission and obtained by Bloomberg News. The list of targeted U.S. goods -- including motorcycles, jeans and bourbon whiskey -- sends a political message to Washington about the potential domestic economic costs of making good on the president’s threat.

Paul Ryan, Republican speaker of the House of Representatives, comes from the same state -- Wisconsin -- where motorbike maker Harley-Davidson Inc. is based. Earlier this week, Ryan said he was “extremely worried about the consequences of a trade war” and urged Trump to drop his tariff proposal.

Other U.S. politicians will also feel the pressure. Bourbon whiskey hails from Senate Majority Leader Mitch McConnell’s home state of Kentucky. San Francisco-based jeans maker Levi Strauss is headquartered in House Minority Leader Nancy Pelosi’s district.

The EU has expressed growing concerns about Trump’s protectionist stance on trade and steel has political importance to the bloc, which was born out of the European Coal and Steel Community in the 1950s. The industry also continues to have economic clout, generating annual sales of around 170 billion euros, accounting for more than 1 percent of EU gross domestic product and directly providing over 300,000 jobs.

The European retaliatory list targets imports from the U.S. of shirts, jeans, cosmetics, other consumer goods, motorbikes and pleasure boats worth around 1 billion euros; orange juice, bourbon whiskey, corn and other agricultural products totaling 951 million euros; and steel and other industrial products valued at 854 million euros. The Brussels-based commission, the EU’s executive arm, discussed the retaliatory measures with representatives of the bloc’s governments at a meeting on Monday evening.

Europe may expand the group of targeted American goods should Trump also follow through on a related pledge to impose a 10 percent duty on foreign aluminum. The list obtained by Bloomberg on Tuesday relates only to steel countermeasures.

"These tariffs right now are just talk, but they have the potential to become quite inflammatory and impact economic growth," Kristina Hooper, chief global market strategist at Invesco, said in an interview with Bloomberg Television. "Tariffs beget more tariffs. It’s like putting bacteria in a petri dish.”

Trump’s vow to curb U.S. imports of foreign steel and aluminum has sparked opposition within his Republican Party and is based on a national-security argument that the EU dismisses. The White House threat risks provoking retaliation across the globe and a slew of complaints to the World Trade Organization, which has never ruled on a dispute involving trade restrictions justified on national-security grounds.

The EU Strikes Back

Some 2.8 billion euros of U.S. goods are targeted in retaliatory tariff

 

European Commission President Jean-Claude Juncker and his leadership team are due to discuss the retaliatory options on Wednesday. The commission is also weighing filing a complaint to the WTO against the U.S. and introducing “safeguard” measures to prevent steel shipments from other parts of the world to America from being diverted to the European market and flooding it.

The tariffs included in draft list discussed on Monday can be imposed without waiting for WTO dispute-settlement procedures, according to the European Commission’s briefing to EU government envoys. They are retaliatory measures worth 50 percent of the EU’s exports of steel which will be hurt by Trump’s plan, and hence can be imposed immediately, according to the commission.