French, German wines and brandy suffer ‘sledgehammer’ blow after new US tariffs announced

The office of the USTrade Representative (USTR) said it is adding aircraft components such as fuselages and wings, and wines and brandy from France and Germany onto a list of goods subject to tariffs, responding to what it said was unfair EU retaliation.

Bottles of French Château Latour wine on sale in a winery in West Hollywood, Los Angeles. George Wilhelm/Los Angeles Times via Getty Images

The new tariffs are part of a 16-year transatlantic battle over aircraft subsidies that both U.S. and European negotiators had recently talked about ending. They will apply from Jan. 12, eight days before Biden succeeds Trump as U.S. president.

New 'sledgehammer' tariffs

Aircraft are already covered by U.S. tariffs, but the addition of components closes a loophole that had allowed Airbus planes assembled in Mobile, Alabama, to be sold in the United States free of tariffs. As a result, those aircraft are likely to be uncompetitive in the U.S. market.

Likewise, some alcohol from the Airbus-producing nations - France, Germany, Spain and Britain - was already subject to tariffs, and other varieties have now been added. The French wine exporters’ federation called it a “sledgehammer” blow.

The United States is the largest market for European spirits. Share broker Jefferies estimated a 6% hit to Remy Cointreau profits, but less than 1% for Campari, Diageo and Pernod Ricard.

Remy Cointreau and LVMH, which makes the world’s top-selling cognac, Hennessy, had no immediate comment. Pernod Ricard declined to comment.

EU and Biden

The European Union will seek a swift resolution of a 16-year battle over aircraft subsidies with incoming U.S. president Joe Biden, saying that new U.S. tariffs have damaged talks with the Trump administration.

The Commission, which coordinates trade policy for the 27-nation European Union, said on Thursday that the U.S. action had “unilaterally” disrupted ongoing negotiations about respective state subsidies for European planemaker Airbus and its U.S. rival Boeing.

“The EU will engage with the new U.S. administration at the earliest possible moment to continue these negotiations and find a lasting solution to the dispute,” it said in a statement.

The office of the U.S. Trade Representative (USTR) said on Wednesday it was adding aircraft components such as fuselages and wings, and wines and brandy from France and Germany onto a list of goods subject to tariffs, responding to what it said was unfair EU retaliation.

Both Washington and Brussels have won cases at the World Trade Organization, the former allowed to impose tariffs on $7.5 billion of EU goods and the latter extra duties on $4 billion of imports from the United States.

The USTR said the EU tariffs, imposed in November, had been distorted by basing them on trade depressed by the COVID-19 pandemic, and because Britain had been cut from the calculation even though it had applied the measures throughout 2020.

In a statement, Airbus said Europe should respond “appropriately”.

Britain and Spain were spared additional tariffs.

Britain said its decision to suspend retaliatory tariffs against the United States from Jan. 1, part of its new-found freedom outside the European Union, was already paying off. However, existing tariffs on some British goods such as Scottish whisky remain in place.