Trade: The door opens for more tariffs on the EU

3 min
Ana Boata
Ana Boata Senior Economist for Europe
Georges Dib
Georges Dib Economist for Latin America, Spain and Portugal

The World Trade Organization (WTO) authorized today the U.S. to impose tariffs on EU-imported goods to cover an estimated annual loss of USD7.5bn in compensation for illegal state aid provided to aircraft maker Airbus. The U.S. additional duties target a total of EUR60bn of EU goods, or close to 15% of total EU exports to the US. The goods taxed are mainly planes and aircraft parts, as well as luxury products – such as wine and spirits – and leather goods. The average tariff increase is estimated at +15pp from the current 2% for these goods. Aircraft parts would be taxed at 15%, beverages at 80% and specialized machinery at more than 100%. However, as this represents only close to 3% of total U.S. imports, the impact on the total U.S. import tariff is deemed negligible (around +0.1pp to the current 8%). We estimate an annual exports loss for the EU of -USD9.7bn. The countries that are expected to lose most are France (-USD2.4bn), Italy (-USD2.1bn) and Germany (-USD1.9bn). In GDP growth terms, this would mean around -0.1pp for France and Italy. Additionally, we expect the U.S. to announce a tariff hike on EU car imports in mid-November.