- The Washington Times - Sunday, October 6, 2019

An obscure fight over aerospace subsidies is set to become a kitchen table issue for American consumers, as the Trump administration prepares to target Italian cheese, French wine and other European goodies with retaliatory tariffs this month.

That could mean higher prices on pecorino for your pasta, a more expensive bottle of Bordeaux on steak night or a pricier glass of Scotch at the bar, analysts and importers say.

The World Trade Organization green-lighted the tariffs after 15 years of litigation over European Union subsidies to Airbus. The U.S. said the subsidies were illegal and harmed American companies such as Boeing. The WTO agreed and granted the U.S. a $7.5 billion arbitration award and gave President Trump another trade win to tout.

U.S. Trade Representative Robert Lighthizer plans to impose a 10% levy on aerospace products and 25% on agricultural products — including British cashmere, German roasted coffee and Spanish olive oil — on Oct. 18.

Some business groups are finding it hard to digest because importers must decide whether to absorb the cost of the tariffs or pass them on to consumers.

The Specialty Food Association said its products shouldn’t be caught in the crosshairs of a fight that is “purely industrial” in nature. They said the price of meats, cheeses, olives and other foodstuffs will increase by 25% to keep up with the levies.

Michael Sands, owner of Calvert Woodley Fine Wines and Spirits in the District of Columbia, said there are “still a lot of unknowns” about the tariffs but the store will have to raise prices if the levies take hold. With his business margins, he said, his store could never just “eat” that kind of increase in the cost of French and Spanish wines or the Italian cheeses it sells. It’s even tougher to swallow on the cusp of the holidays.

“There’s no good time of year for this kind of tariff to occur, but this time of year is especially bad, for us and other retailers, as well as wholesalers, consumers — pretty much everyone,” Mr. Sands said in an email. “It’s awful to get caught in this kind of situation, especially over something that really has nothing to do with wine, liquor, cheese, etc., but this is, unfortunately, the way it goes.”

Tariff policy is complex, so analysts predict an array of effects in the marketplace. Shoppers who can afford cashmere will probably still buy luxury sweaters, though coffee drinkers might pick different brands to avoid price shock.

European producers, in turn, may feel a pinch if they lose market share in the U.S.

“We’re all tied together, and that’s why tariffs are so harmful. They affect all parties,” said Gabriella Beaumont-Smith, a macroeconomics policy analyst at the conservative Heritage Foundation.

Mr. Trump insists tariffs are effective for correcting trade imbalances and demanding fairer treatment from other countries.

He has famously wielded tariffs against China and homed in on French wine, in particular, months ago. France angered the president by taxing digital companies such as Google and Facebook. He said American wine is better, anyway — even though he is a professed nondrinker.

Mr. Trump celebrated the WTO’s decision to approve sweeping levies on Europe last week. He told reporters that he has racked up “a lot of wins at the WTO since I became president.”

The administration mostly is punishing the four countries responsible for aiding Airbus: the United Kingdom, France, Germany and Spain. Yet it is spreading the tariff pain across the European Union because of its failure to end the subsidies.

“The EU collectively bears responsibility for the dispute reaching this point,” the Office of the U.S. Trade Representative said in a statement to The Washington Times. “The list also targets products of industries that are important to the EU and will provide incentive for the EU to address its WTO-inconsistent subsidies.”

Analysts said the tariffs could complicate trade relationships with European nations, especially as the administration eyes a trade deal with the U.K. if and when the British pull out of the EU.

Although the targeted products are popular — Twitter jokesters said tariffs on Scotch should accelerate impeachment proceedings — analysts said the administration may be betting that consumers won’t change their habits or feel the U.S. can bring in greater revenue by targeting goods that people like.

The levied items also have plenty of competition. A French wine aficionado could explore a sauvignon blanc from New Zealand, and home cooks could use domestic substitutes for olive oils and cheeses.

That comes with its own trade-offs, however, because tariffs hit regional products that depend on the unique climate and craftsmanship from distinct corners of Europe.

Mr. Sands said customers may look to wines from non-tariffed regions.

“Certain rare Bordeaux and Burgundy can’t really be replicated, but generally speaking there are so many good wines, from all over the world, so the options for customers are practically limitless,” he said.

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