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EU to Impose $4 billion in Tariffs on US Goods Starting August 7th
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The European Union is preparing to enact $4 billion in retaliatory tariffs on American products starting August 7th, escalating a long-running dispute over steel and aluminum. these “reciprocal” levies, as described by officials, target a range of US exports, including motorcycles, denim, and agricultural products.The move follows a World trade Association (WTO) ruling that authorized the EU to take action against the United States for its tariffs imposed in 2018 under the Trump administration.
Understanding the ‘Reciprocal’ Tariffs
The EU’s response is directly linked to former President Donald Trump’s decision in 2018 to impose tariffs of 25% on steel and 10% on aluminum imports from various countries, including the EU, citing national security concerns. The WTO later found these tariffs to be in violation of international trade rules. The EU has stated these tariffs are not intended to be permanent, but rather a means of pressuring the US to remove its existing tariffs.
Did you Know? The WTO authorized the EU to impose tariffs on up to $4 billion worth of US goods annually.
Affected Industries and products
The tariffs will impact a diverse array of US industries. Key products facing increased duties include:
- Motorcycles (Harley-Davidson is expected to be significantly affected)
- Denim
- Wine and spirits
- Agricultural products like peanuts, cranberries, and corn
- Certain steel and iron products
States with significant exports in these sectors, such as Wisconsin (motorcycles), North Carolina (denim), and California (wine), are anticipated to feel the economic impact most acutely. The american Iron & Steel Institute estimates the original US tariffs cost the industry 36,000 jobs.
Timeline and Implementation
The tariffs are scheduled to take effect on August 7th, 2024. EU Trade Commissioner Valdis Dombrovskis has indicated the EU remains open to negotiations with the US to resolve the dispute and avoid prolonged trade tensions. However, no formal talks are currently scheduled. The initial implementation will be monitored closely by both sides to assess the impact on trade flows.
| Event | Date |
|---|---|
| US Imposes Steel & Aluminum Tariffs | June 1, 2018 |
| WTO Authorizes EU Retaliation | June 15, 2023 |
| EU Tariffs Take Effect | August 7, 2024 |
Pro Tip: Businesses involved in exporting these products should review their contracts and pricing strategies to account for the increased costs.
Potential Economic Consequences
Economists predict the tariffs could disrupt supply chains and increase costs for consumers on both sides of the Atlantic. The Peterson Institute for International Economics estimates the EU tariffs could reduce US exports to the EU by approximately $2.8 billion annually. The impact on the US economy is expected to be relatively modest, but concentrated in the affected industries.
Past Context: Trade Disputes and Tariffs
Trade disputes and the imposition of tariffs are not new phenomena in international economics. Throughout history, countries have used tariffs as tools to protect domestic industries, retaliate against unfair trade practices, or achieve political objectives. The Smoot-Hawley Tariff Act of 1930, such as, is widely considered to have exacerbated the Great Depression by triggering retaliatory tariffs from other countries. More recently, the US-China trade war under the Trump administration saw billions of dollars worth of goods subject to tariffs, leading to significant economic disruption.
The WTO, established in 1995, was created to provide a framework for resolving trade disputes and promoting free and fair trade. However, the WTO’s dispute resolution mechanism has faced challenges in recent years, with the US blocking appointments to its
