From Friday October 18, a long list of EU-made goods from olive oil to specialty cheeses will be subject to a 25% retaliatory tariff when they enter the US to counter adverse effects of subsidies from EU member states to Airbus, which are claimed to have harmed US civil aircraft makers such as Boeing.
While the tariffs are designed to punish the EU, they will be paid by US importers and passed onto US consumers, causing a host of players in industries entirely unrelated civil aviation to suffer, food companies on both sides of the Atlantic have argued.
Whether EU manufacturers or US importers ultimately end up footing most of the bill will depend on the respective clout of the companies involved, but it is likely that at least some of the costs will be passed onto US consumers, raising the price of goods that in many cases already come with a premium price tag.
New and unplanned costs
The immediate issue concerning the letter’s signatories relates to goods that were shipped from Europe before the decision was taken, but will arrive in the US (and be subject to the new tarrifs) on or after October 18, as in these cases, US importers will have to cough up 100% of the extra cost.
“By imposing tariffs beginning October 18, 2019, the US will be exacting new and unplanned costs on goods that were shipped from subject countries prior to October 2 but which will arrive at US ports after the tariffs take effect,” says the letter (dated Oct 15), which was signed by 80+ organizations and companies including The Specialty Food Association, the American Cheese Society, the National Restaurant Association, and the North American Olive Oil Association.
“These new duties will not be borne by the EU producer or manufacturer of those now-dutiable goods, but by the American importers which have already purchased the products and, very quickly, by American consumers. Nearly every product impacted by these tariffs transits to the US from Europe by sea.
“In order to arrive in Washington State or Alaska before October 18, shipments of these products would have had to depart Europe in the first half of September or earlier.”
‘We ask that all goods exported from Europe October 2 or earlier be exempt from tariffs’
The letter adds: “We recognize the right of the US under the WTO agreements to implement the WTO Arbitrator’s award… but ask that you take appropriate technical steps to minimize the impact of the tariffs on American buyers of affected products.
“To prevent the cost of the tariffs from falling entirely on American businesses and consumers, we ask that all goods exported from Europe October 2 or earlier be exempt from tariffs.”
The USTR made a similar accommodation in May for goods impacted by List 3 tariffs on China, notes the letter: “This was an appropriate technical accommodation. We ask for its use again in this case.”
EU-made goods subject to retaliatory tariffs include: Olive oil, Olives, Frozen crabmeat, Salmon, Butter, Yogurt, Gouda cheese, Edam cheese, Roquefort cheese, Cheddar cheese, Stilton cheese, Citrus fruits, fruit juice, Sparkling wine, liquers, Lobster.
Tariffs will ‘throw things into chaos’
The tariffs, which will impact imports of sweet biscuits from the EU (as one example), would “make these products unaffordable for US consumers,” warned Mondelēz International, which owns the EU-manufactured LU brand of biscuits, which is also sold in the US.
Campbell Soup, in turn, has warned that a tariff on Danish butter cookies will be devastating for its subsidiary Kelsen Group, “which accounts for nearly all biscuits entering from Denmark.”
Most imported cheeses “are of a specialty nature and not easily replaced by domestic US production, especially sheep’s milk cheeses,” added Schuman Cheese, which argued there is not sufficient available capacity in the US or other locations to produce them:
However, the biggest impact will be on the US olive oil industry, which remains dominated by imported EU products, claimed the North American Olive Oil Association (NAOOA), which told FoodNavigator-USA in a recent interview that the tariffs would “throw things into chaos,” noting that domestic producers can't just increase supplies by turning on a tap.
NMPF: Tariifs entirely warranted
Amid the chorus of disapproval from firms likely to be directly hit, however, there were some voices of support for the tariffs in the food industry, with the National Milk Producers Federation (which represents US dairy farmers), arguing that including EU cheeses, yogurt, and butter on this list was “entirely warranted.”
Randy Mooney, Producer Chairman at the NMPF said in a statement this morning: "The U.S. is running a $1.5bn dairy trade deficit with Europe because of unfair EU trade practices that largely block our access to their market while they enjoy broad access to ours. EU policies such as Italian-initiated bans on American-made parmesan, asiago and gorgonzola mean that they can ship us $1bn in cheese each year while U.S. cheese exports to the EU clock in at $6m.
"In light of this disparity and the EU’s refusal to meet its WTO commitments regarding illegal Airbus subsidies, American dairy farmers saw the proposed retaliatory tariff list’s strong focus on EU dairy and cheeses as at least temporarily creating a slightly more level playing field for Made in America products that face even higher barriers to entry in the EU market."