New US-EU Tariff fight looms

Business | 4 Oct 2019

The United States said it would implement a 10 percent tariff on European-made Airbus planes and 25 percent duties on French wine, Scotch and Irish whiskies and cheese from across the continent as punishment for illegal EU aircraft subsidies.

The announcement came after the World Trade Organization gave Washington the green light to impose tariffs on US$7.5 billion (HK$58.5 billion) worth of EU goods annually, a move that threatens to ignite a tit-for-tat transatlantic trade war.

The US trade representative's target list for EU tariffs, set to take effect on October 18, includes Airbus planes made in France, Britain, Germany and Spain - the four Airbus consortium countries.

It also includes UK-made sweaters, pullovers, cashmere items and wool clothing, as well as olives from France and Spain, EU-produced pork sausage, pork products other than ham, and German coffee.

But no tariffs will be imposed on EU-made aircraft parts used in Airbus' Alabama assembly operations or those used by rival US planemaker Boeing, safeguarding US manufacturing jobs.

The eurozone saw ongoing contraction in manufacturing, with IHS Markit's September eurozone composite final purchasing managers' index sinking to 50.1 from August's 51.9.

The US Trade Representative has sought WTO ratification of its tariff list by October 14, and the duties could come into force just three days after a scheduled October 15 tariff increase to 30 percent from 25 percent on US$250 billion worth of Chinese goods.

Ray Dalio, the billionaire founder of the world's biggest hedge fund, said preliminary discussions on limiting US investments in China made him wonder if the Trump administration is "inching toward bigger moves."

In an essay posted on Tuesday, he said: "Regarding the capital and currency wars, the ability of the US president to unilaterally cut off capital flows to China and also freeze payments on the debts owed to China, and also use sanctions to inhibit non-American financial transactions with China must be considered as possibilities.

"That's why the proposed step of limiting American portfolio investments in China makes me both think about the implications of this step and wonder if it is an inching toward bigger moves."

Elsewhere, the latest sales data from De Beers reinforces why this is one of the worst years for the diamond industry in a long time.

The Anglo-American subsidiary yesterday reported sales that showed demand for rough diamonds is continuing to plunge as buyers refuse to buy stones when they cannot make a profit.

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