October 3, 2019 / 10:10 AM / 13 days ago

Trump hails 'nice victory' on trade as EU whisky, wine makers left reeling

LONDON/WASHINGTON (Reuters) - President Donald Trump hailed a “nice victory” on Thursday after the United States got the green light to place tariffs on European Union goods in a dispute over EU aircraft subsidies.

But Wednesday’s decision by the World Trade Organization (WTO) left Scottish whisky makers, Spanish winemakers and French cheesemakers fuming as the U.S. tariffs targeted products from countries in the Airbus (AIR.PA) consortium.

Engineers in Germany worried that the dispute over subsidies granted to the European planemaker was leading to “a table tennis match” over trans-Atlantic tariffs, and France and Germany signaled retaliatory moves by the EU.

The WTO decision gave the United States the go-ahead to impose tariffs on $7.5 billion worth of EU goods annually in the long-running case. The global trade watchdog will hold a special meeting of its Dispute Settlement Body on Oct. 14 to formally adopt the decision.

The dispute darkens a global economic outlook that has already been dimmed by a U.S.-China trade war now in its second year. Washington and Beijing have imposed tariffs on each other’s goods worth hundreds of billions of dollars.

Trump wrote on Twitter the EU “has for many years treated the USA very badly on Trade due to Tariffs, Trade Barriers, and more. This case going on for years, a nice victory!”

Washington said that, after 15 years of litigation, it would impose 10% tariffs on Airbus planes, a move that could hurt orders by U.S. airlines, and 25% duties on French wine, Scotch and Irish whiskies, and cheese from across the Continent.

The size and scope of the tariffs were reduced considerably from a $25 billion list floated by Washington this year that included helicopters, major aircraft components, seafood and luxury goods.

The U.S. Trade Representative’s office said it would continually re-evaluate the tariffs based on its discussions with the EU, but could increase the tariffs “at any time, or change the products affected.”

White House trader adviser Peter Navarro, speaking with Fox Business Network on Thursday, warned Europe against retaliatory measures since the U.S. tariffs were approved by the WTO.

“There’s going to be no tit-for-tat retaliation,” Navarro said. “Under the rules of the WTO, which we’re complying with here, we get to do this and they should not do anything back.”

But French Finance Minister Bruno Le Maire said preparations were under way in Europe to react with sanctions.

“If the American administration rejects the hand that has been held out by France and the European Union, we are preparing ourselves to react with sanctions,” he said. .

His German counterpart, Olaf Scholz, told the mass-circulation Bild newspaper the past few months had shown that trade conflicts helped no one, adding, “Therefore we will react to the new situation in a determined but considered way.”

Britain said it was seeking confirmation from the WTO that it had complied with the organization’s rulings and should not face tariffs. U.S. tariffs on European goods have plunged the UK into a trade war between the United States and the EU just as it plans to leave the 28-nation bloc.

The Scottish Whisky Association said jobs and investment were at risk from a 25% tariff on single malt. Scotch whisky exports to the United States, the industry’s biggest single market, were worth 1 billion pounds ($1.23 billion) last year.

FILE PHOTO: U.S. President Donald Trump addresses a joint news conference with Finland's President Sauli Niinisto in East Room of the White House in Washington, U.S., October 2, 2019. REUTERS/Leah Millis

“Despite the fact that this dispute is about aircraft subsidies, our sector has been hit hard,” the association’s chief executive, Karen Betts, said in a statement, urging restraint from both sides.

TARIFF TABLE TENNIS

Spanish vintners said their wine would cost too much in U.S. stores if tariffs were confirmed.

“The tariffs will affect our competitivity,” said a spokesman for CECRV, the association for producers of Spanish wines such as Rioja and Cava.

Germany’s VDMA engineering association said it was disappointed the European Commission, the EU executive, had not defused the row. “The current situation resembles a table tennis match,” said VDMA trade expert Ulrich Ackermann.

Spanish olives, British sweaters and woollens, and German tools and coffee were targeted in addition to British whisky and French wine.

Cheese from nearly every EU country will also be hit with the 25% tariffs, but Italian wine and olive oil were spared, along with European chocolate.

“Dairy products are going to be directly hit ... we are going to fight for these measures to be delayed,” said Michel Nalet, spokesman for France’s Lactalis group, the world’s biggest dairy firm, which makes butter and cheeses under the President label.

The U.S.-based Cheese Importers Association of America said it would challenge a decision by the U.S. Trade Representative’s office to skip offering a grace period for goods that were already in transit when the tariffs took effect.

Slideshow (6 Images)

There was relief for some who had expected to be drawn into the row but were not.

Shares in European luxury goods, including British fashion brand Burberry (BRBY.L), and drinks companies, such as France’s Remy Cointreau (RCOP.PA), rose on Thursday, after the tariffs excluded cognac, champagne and leather goods.

One person familiar with the case said the U.S. Trade Representative was deliberately not using the full extent of WTO-approved ruling to coax the EU into negotiations.

Airbus and U.S. firm Boeing Co (BA.N), the world’s two largest planemakers, have waged a war of attrition over subsidies at the WTO since 2004. The dispute has tested the trade policeman’s influence and is expected to set the tone for competition from would-be rivals from China.

Additional reporting by Tim Hepher, Julien Ponthus, Joice Alves, Alison Williams and Danilo Masoni in London, Philip Blenkinsop in Brussels, Joseph Nasr in Berlin, and David Shepardson and Andrea Shalal in Washington; Writing by Edmund Blair; Editing by Jon Boyle, Timothy Heritage and Jonathan Oatis

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