Americans love wine — especially their international imports. Indeed, around 35 percent of wine sales in America are imported from around the world. Some prefer bubbly, while others enjoy a deep red, but all American wine consumers are facing a problem that just might put their favorite alcoholic beverage out of reach. Months after imposing a 25 percent tax on European wines, the Office of the U.S. Trade Representative announced in early December of 2019 that it’s considering a 100 percent tariff on French wine imports. Even worse, the proposed tariff may also be applied to wine’s best pairing: cheese.
What did the wine and cheese industry do to the United States? Well, nothing really. So what’s the point?
Long story short, President Trump is annoyed with France. In July 2019, France tried to force large American-based digital corporations like Google and Facebook to comply with its newly-passed digital service tax (DST). Mr. Trump denounced this move, and because France hasn’t backed down, his response is to hit them with a tariff of 100 percent on wine and other goods like handbags, makeup, and soap — and other products that have nothing to do with the DST.
But the French DST dispute is just hitting the tip of the iceberg of the ongoing trade issues between the United States and the EU as a whole. The first major trade “battle” between the two began over 15 years ago and it’s still being waged today. And, yet again, it has nothing to do with wine. The World Trade Organization (WTO) found that Airbus, a European aerospace company, received over $22 billion in illegal state-sanctioned subsidies. These subsidies are strictly prohibited by global trade rules because they’re unfair to foreign competitors.
In an attempt to make things right, the WTO awarded the U.S. $7.5 billion annually in tariffs in October 2019. Shortly thereafter, the United States implemented a 25 percent tariff on various European goods. The goods included wine from France, Spain and Germany — but only a 10 percent tax on aircraft, the industry that started the battle in the first place.
This wasn’t a smart move, because as EU Trade Commissioner Cecilia Malmstrom admitted, “If the U.S. decides to impose WTO authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same.” And they’re likely to make good on their promise very soon. Tariffs on American products could be devastating to the U.S. economy that exports over $34 billion worth of products to France each year. It would be especially harmful to the aircraft, oil, gas and medical industry, the top U.S. commodities imported by the French.
This tit-for-tat trade theory is nonsensical, because it only ends up negatively impacting more people who shouldn’t feel the consequences of decisions they didn’t make.
Trade wars just leave individuals worse off. Indeed, according to tax policy experts at the Tax Foundation, “If all tariffs announced thus far were fully imposed by the United States and foreign jurisdictions, U.S. GDP would fall by 0.55 percent ($136.86 billion) in the long run …Wages would fall by 0.37 percent and employment would fall by 424,200.” They point out that historically, trade wars only harm the American people by leading to higher prices and fewer jobs.
The Trump administration should rethink how the nation makes trade decisions and what the real-life impact will be. Mr. Trump ran on a platform of improving the economy and creating more jobs for the working class. By falling into the cycle of back-and-forth punitive trade measures, he’ll be pushing the nation away from the goal of American prosperity. The United States shouldn’t be threatening Europeans with drastic taxes in a war that no one can ever win. The pernicious impacts these tariffs would cause are clear, and even worse, they’re unending.
If the goal is to level the playing field of worldwide trade, then the government simply can’t continue to punish industries that aren’t involved in the original disputes. It’s unnecessarily punishing uninvolved businesses and has the potential to kill jobs. Corporations who willingly accept illegal subsidies should instead bear some of the responsibility in repayment — not an unrelated industry. Otherwise, the administration is just placing an undue burden on those who don’t deserve it. As a result, all consumers lose out.
• Molly Davis is a consumer freedom fellow and senior contributor at Young Voices. She is also a policy analyst at Libertas Institute, a think tank in Utah.