US Trade Tariffs on EU Agricultural Products Will Prove a Hard Landing for Some

The impact of the recently proposed US trade tariffs on EU agricultural products differs per product and country. Wine, cheese, butter, and olive oil will be impacted more than pork, fruit, and vegetables, according to the recent RaboResearch article “A Hard Landing for Some: US Trade Tariffs on EU Agricultural Products”.

On Wednesday, October 2, the WTO ruled in favor of the US in a long-running trade dispute over illegal government support to European aircraft builder Airbus. It allowed the US to impose tariffs on USD 7.5bn worth of products from the EU-28.

The tariffs proposed are not a broad list focused on the whole European agricultural sector, rather it targets specific countries and product categories. Besides airplanes and industrial goods, the list contains 119 agricultural products, ranging from French wine to Italian cheeses, that will be subject to a 25% ad valorem tariff.

“The impact of the proposed trade tariffs differs per product and country, with wine, cheese, butter, and olive oil to be impacted more than pork, fruit and vegetables,” says Stefan van Merrienboer, RaboResearch Analyst – Farming, Grains & Oilseeds.

Depending on the sector, the impact of the tariffs consists of:

• US consumers to pay higher prices for targeted EU-28 agricultural products.
• Substitution effect: US consumers shift to other products in the same product category. This could benefit non-tariff countries and local US producers.
• EU-28 producers of targeted products may face lower margins if producers cannot transfer the tariffs directly to (US) consumers.
• Relocation of impacted EU-28 production to non-tariff EU-28 countries, which is currently being considered by European spirit producers. Another option is to use alternative shipping options. Producing in the country of origin, for example, shipping in bulk, and then bottling in-market.

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