EU’s latest trade moves of no help to this country

The devil is always in the detail, particularly where trade wars are concerned.

EU’s latest trade moves of no help to this country

The EU’s decision, last week, to begin charging 25% import duties on a wide range of US products in retaliation to Donald Trump’s introduction of tariffs on EU steel and aluminium earlier this month is a typical case.

The EU is targeting €2.8bn worth of goods which are imported from the US with new import tariffs — adding 10%-50% onto their cost when entering Ireland or any other EU country.

While Harley Davidson motorbikes and cranberries are featured as key examples, they are the least of the worries for Irish business.

The EU will rebalance bilateral trade with the US based on the value of its steel and aluminium exports affected by the US measures. Those are worth €6.4bn.

Of this amount, the EU will rebalance on €2.8bn worth of exports immediately.

The remaining rebalancing on trade valued at €3.6bn will take place at a later stage — in three years time or after a positive finding in a World Trade Organisation dispute settlement if that should come sooner.

Friday’s decision has wide-ranging implications for many US multinational manufacturing operations in Ireland, as well as a slew of Irish-owned companies, who import precision stainless steel and aluminium tubing used in medical devices, surface ground glass products for optical products, receptacles, tanks and reservoirs, as well as a range of unique wiring products.

Irish industry imports two thirds of all its working materials from abroad, adds value in a bespoke manufacturing process and exports the finished goods.

The EU listing will push up the cost of these goods by 25%, where they originate in the US.

Addressing the Oireachtas last week, president of the European Commission Jean-Claude Juncker stated Washington’s introduction of tariffs “goes against all logic and history,” and that the EU will do everything to restore the balance of transatlantic trade.

And whereas this may be fine and dandy at a political level, down on the factory floor, it will impact the cost competitiveness of many small and large businesses located in Ireland.

The Irish whiskey industry will be particularly worried that the EU 25% import tariff included US whiskey.

There may appear to be a short-term gain for Irish whiskey producers who export in large volumes to the US, but there is the very real danger that Trump will vent his ire on this EU measure by responding in kind with a hefty import duty on Irish and Scotch whiskies, hitting both very hard.

Following the commission’s announcement, Trump promised the US will no longer “be taken advantage of”, and slammed the EU for not allowing American farm products to be sold during a rally in Minnesota.

Whereas he was mainly referring to the EU imposing a 25% tariff on orange juice and cranberries, in the US, whiskey is also considered a farm product.

It is widely expected the US will respond by extending its tariffs from the current steel and aluminium, where 25% and 10% have been applied respectively, to a much wider range of products.

And following the EU inclusion of a colossal 50% tariff on front-loader washing machines and men’s clothing, we can expect a major escalation of both the range of goods and the level of tariffs imposed by the US in their counter-move action.

The EU-US trade friction is being matched by an ever-growing trade tariff battle between the US and China.

All of which has worrying implications for Irish businesses who are facing potential tariffs in dealing with their key market in the UK post-Brexit.

It is inevitable that many of them will be severely damaged as this trade war escalates.

John Whelan is an expert consultant on Irish and international trade.

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