Trade Groups Mostly Ask to Be Spared in Airbus Tariff Carousel Action

As the Office of the U.S. Trade Representative weighs whether to remove any items from the Airbus retaliatory tariff list and replace them with other goods, or to hike tariffs on any goods now being taxed at an additional 25%, most trade groups are asking him to limit tariffs to aerospace, and spare what they import. The decision is due by Aug. 12.

The National Air Carrier Association, which represents 17 airlines, including some that buy new Airbus planes, said with passenger flights down 90%, continuing the 15% tariff on Airbus planes, or hiking it, would be disastrous. Even though the planes face a lower tariff than the other goods, they are the biggest import by value in the target list -- and the only one directly connected to the dispute.

“In light of Airbus’ agreements with the governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts to what the World Trade Organization (WTO) considers the appropriate interest rate and risk assessment benchmarks, we implore USTR to rescind the current tariffs,” the group said.

Similarly, Jet Blue Airways said that it, “like other airlines, is legally bound to accept deliveries for aircraft ordered before the trade dispute. These new aircraft deliveries remain subject to tariffs, even though they are arriving to JetBlue at a time when demand for travel is virtually non-existent.”

Boeing, which is the reason this dispute began, asked USTR to continue to spare European aerospace parts, which are used in Boeing manufacturing and in the engines it buys. It also asked USTR to spare airlines while also doing whatever it can to push the EU to settle the matter quickly. Boeing said the recent announcement that Spain and France are changing the terms of their loans to Airbus does not bring Airbus and the EU into compliance.

The Distilled Spirits Council, which represents the largest target after Airbus planes, said many companies own both U.S. and European Union spirits, as well as wine and beer. U.S. spirits were hit with 25% taxes in the EU before EU brands were hit in the U.S., as the EU retaliated for 25% tariffs on its steel exports.

“Both parties should commit not to impose any additional tariffs on beverage alcohol in trade disputes not involving beverage alcohol,” the council said. “Returning to zero tariffs on distilled spirits products at this time is critical to support the U.S. hospitality industry, which continues to face economic hardships due to the mandatory closings of restaurants, bars and distillery tasting rooms.”

RILA, the Retail Industry Leaders Association, said it's concerned about the impact on consumers of higher taxes on olive oil, and the possibility that new consumer goods like coffee, cookies and jams could be taxed. They said if USTR continues to target these goods, it should offer a grace period for goods on the water.

The American Bakers Association said that “applying tariffs to sweet biscuits, wafers and waffles would not serve to resolve the U.S. WTO dispute with the EU concerning certain subsidies granted by the EU and certain member States to the EU large civil aircraft domestic industry. Some of the main sources of U.S. sweet biscuit, wafer, and waffle imports, including Demark and Italy, have not been identified as countries providing subsidies for the manufacture of large civil aircraft.” They said baked goods suppliers are working hard to keep grocery shelves stocked during the pandemic and “added duties would only complicate an already challenging operating landscape.”

The National Confectioners Association said that food traders in Europe are urging resolution of the disputes already, and chocolate doesn't need to be included. “We estimate that more than 1,500 jobs could be lost due to increased tariffs of 25% on $1.1 billion of imported confectionery, a sizable number at a volatile time in our industry.”

The National Restaurant Association said higher taxes on seafood, cheese, ham, pasta, coffee, olives and olive oil, chocolate, potatoes, certain fruit products, wine, sparkling wine, whiskey, beer, gin, brandy and vodka impacts restaurants' ability to operate. Even if they were able to switch to U.S. products in those categories, “the demand these tariffs will create for domestic alternatives will result in domestic price increases that we simply cannot absorb. ... Now more than ever, when restaurants are struggling to survive, is not the time to impose more tariffs on our industry.”

Similarly, the Specialty Food Association said “these increased costs to small businesses threaten to put more Americans out of work at a time when the U.S. is hoping to return to some level of normalcy.”

Several motorcycle trade associations expressed dismay that while they were spared last year, they could be hit this year. The California Motorcycle Dealers Association said, “California’s motorcycle industry has never recovered from the recent disastrous recession, as most other retail industries have. New on-road motorcycle sales have only recovered 56%, and off-highway vehicles 38%, from pre-recession levels,” and the pandemic has also devastated the industry.

Even trade groups whose European imports are of small volume asked to be spared, sometimes for the very reason that their goods could not have much sway in Brussels.

The National Coffee Association said that “coffee imports from the EU under these classifications were valued at $319 million in 2019, amounting to 0.06% of total U.S. imports from the EU.”

The International Bottled Water Association said, “In 2019, all imports from Europe under HTS Code 2201.90 were $34 million, accounting for less than 0.3% of the requested $11 billion in U.S. retaliatory duties. This is a mere rounding error to the underlying dispute.”

Four manufacturing firm trade groups spoke out about copper and brass alloys or tooling.

The Precision Metalforming Association said one of its companies said that if tariffs were hiked on alloys, it would have to produce those goods outside the U.S., or stop making them. “Absorbing the cost would put our company including, our 600 employees, out of business,” the company said. Another company said, “German mills are the dominant suppliers of 500-series bronze and oxygen free C102 copper globally. The added cost would certainly push our downstream customers to move their production offshore. Many of these customers have facilities in Mexico and/or China — and moving a stamping die is not very difficult, especially when the economics force it.” The company said tariffs would lead to a 30% cut in its headcount.

The National Tooling and Machining Association said that it exports more tooling (HTS 8207.30.30) to the United Kingdom and France than they do to the U.S., though it acknowledged Germany and Spain exported more than they imported. “Total exports of HTS 8207.30.30 to the EU came to $21.6 million in 2018 and $22.1 million in 2019, exposing U.S. tool makers to significant risk of retaliation were the U.S. to impose these duties.”

The California Canning Peach Association, whose competitors were on the last list, asked for the 25% tariff to be hiked to 100%. It said that Greek canned peaches get heavy subsidies, and the American canned fruit industry has lost market share in Europe as a result, and is starting to face competition here, too.

Since the 25% tariff on canned peaches began, “for reasons the California industry cannot entirely explain, US imports of Greek canned peaches have substantially increased over prior-year levels,” the group said.

The National Milk Producers Federation asked for cheese and butter to stay on the list, but praised USTR for not including mozzarella, since it feels that Italy has been reasonable in its geographic indication rules for that cheese.