BRUSSELS — The trade wars threatening to push the global economy into recession are entering a new phase, with the United States and European Union escalating a dispute that endangers the world’s biggest trade relationship.
After the Trump administration slapped steep tariffs on $7.5 billion in EU goods, mainly traditional produce like cheese and wine, the Europeans made clear they would retaliate in kind. Some fear the tariffs could ultimately lead to U.S. taxes on European cars, a big economic blow that Trump has been threatening to deliver for months.
“This step triggers fears of a new round of escalation of tariff wars,” said Alex Kuptsikevich, a financial analyst with brokerage FxPro. “The introduction of tariffs and fears of tit-for-tat steps could further suppress business sentiment, which is already at the lowest levels for years.”
The Trump administration’s latest tariffs target large aircraft but also many typical European products such as olives, whiskey, wine, cheese and yogurt. They take effect Oct. 18 and amount to a 10% tax on EU aircraft and a steep 25% rate on everything else.
The U.S. got the legal go-ahead Wednesday from the World Trade Organization in a case involving illegal EU subsidies for the plane maker Airbus, which predates the Trump administration.
“If the U.S. imposes countermeasures, it will be pushing the EU into a situation where we will have to do the same,” said European Commission spokesman Daniel Rosario. Total U.S. investment in the EU is three times higher than in all of Asia. And EU investment in the U.S. is eight times that invested in China and India combined.
“If it weren’t for the wider trade war, everybody would kind of shake this off and say it’s just business as usual under WTO rules,’’ said Edward Alden, of the Council on Foreign Relations. “In the current context, it’s going to be hard to contain. The Europeans feel like their economies are under assault.’’
The EU is not allowed to retaliate against U.S. sanctions approved by the WTO. But the 28-country trade bloc has shown a willingness to stretch the rules when it comes to responding to Trump’s aggressive trade policies, Alden said.
For example, Trump last year imposed tariffs on steel and aluminum from the EU and other countries, claiming they were a threat to U.S. national security. The WTO gives countries wide leeway to decide their own national security interests, so Trump’s move appeared to pass muster with the Geneva-based trade monitor. But the EU lashed back with retaliatory tariffs on U.S. products anyway.
Rising uncertainty over one of the oldest and biggest economic trade paths would further darken the outlook for importers, exporters and manufacturers on both sides of the Atlantic.
Bob Bauer, president of the New Jersey-based Association of Food Industries, which represents around 1,000 food importers and exporters worldwide, said his members are angry that food is being targeted in a dispute over aircraft subsidies.
“We’re going to be paying so that Boeing and Airbus can continue to receive these subsidies,” Bauer said, adding that many food importers are small, family-owned businesses that can’t absorb a 25% tariff because food has low profit margins to begin with.
The head of the Spanish Federation of Food and Beverage Industries, Mauricio García de Quevedo, said the new U.S. tariffs will make it harder for the companies he represents to compete internationally. And that will contribute to job losses, he said.
The United States is the Spanish sector’s second-biggest food and beverage client after the EU, according to the federation. The sector exported $1.9 billion last year.
Miguel Blanco, the secretary-general of Spain’s farming-sector umbrella group COAG, representing more than 15,000 Spanish farmers and livestock breeders, said the tariffs are “completely unfair and overblown.”
“Once again, the farming sector is going to pay for an EU trade war which has nothing to do with the Spanish countryside,” Blanco said, according to Europa Press.
The Federation of French Wines and Spirits Exporters also deplored the U.S. decision.
“We don’t feel at all initially involved in this litigation so we feel we are a bit hostages of these retaliatory measures,” said federation president Antoine Leccia.
In Germany, which has Europe’s largest economy and focuses heavily on exports, the Federation of German Industries said the U.S. was using the WTO ruling to intensify trade disputes.
U.S. President Donald Trump has threatened to impose tariffs on European cars, a huge sector in Germany, and some fear this week’s escalation could lead to that.
“There is a risk that many industries on both sides of the Atlantic will find themselves in a lose-lose situation,” federation chief Joachim Lang said.