The U.S. is ratcheting up its punishment on the European Union with new tariffs on French and German wine and other alcoholic beverages as both sides remain entrenched over aircraft subsidies.
The Trump administration, says the Office of the U.S. Trade Representative, is only responding to what it considers unfair tariff usage by the Europeans. The World Trade Organization ruled last year the U.S. had the right to hit EU nations with $7.5 billion in tariffs because of Europe’s Airbus subsidies. The WTO ruled in October the EU could hit the U.S. with $4 billion in tariffs to punish the U.S. for subsidizing Boeing.
But the EU chose to base its tariffs on trade that occurred from August 2019 through July 2020, during some of the months that trade was depressed because of the COVID-19 pandemic. That, the USTR argues, is not fair.
“Specifically, the EU’s action does not mirror the U.S. action because the methodology used by the EU to exercise its $4 billion authorization relies on a benchmark reference period affected by the economic downturn caused by the COVID pandemic,” the USTR said Thursday in defense of its decision to boost tariff retaliation against the EU. “Under this methodology, the EU was able to cover a greater volume of imports than if, like the United States, it had used data from a period when trade was not affected by the pandemic.”
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As a result, the USTR said more wine as well as “certain cognac and other grape brandies from France and Germany” will be hit with tariffs.
The new tariffs will come on top of a long list of other wines as well as European cheeses and dairy products that are already being hit with a 25% tariff. The list includes yogurt, milk, cheddar cheese, Swiss cheese, cherry juice, whiskey and peaches.
The new tariffs couldn’t come at a worse time for U.S. restaurants, hotels and alcohol distributors, according to the Distilled Spirits Council of the United States.
“These tariffs not only harm EU spirits producers, they also disrupt and negatively impact the entire U.S. hospitality industry supply chain,” the group said in a statement Thursday. “Hospitality businesses and our consumers, as well as producers, wholesalers and importers of distilled spirits are collateral damage in a dispute wholly unrelated to the drinks business. These tariffs are continuing to have a devastating impact on our businesses, which are also suffering due to the closings of restaurants, bars, and distillery tasting rooms because of the COVID-19 pandemic.”
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