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(Bloomberg) – Some of Europe's biggest luxury brands are targeted by President Donald Trump's latest pay slate, which could cost billions of dollars in exports of whiskeys, wines, champagnes, handbags and costumes for men to the United States.
As expected, a group of three World Trade Organization (WTO) arbitrators said on Friday that the United States could legally impose tariffs on a package of European exports, in retaliation for unlawful government aid to Airbus SE by Europe. European sources have indicated that they expect the WTO arbitrators to release a report by the end of the month that would allow new US duties on a range of goods from 5 to $ 7 billion a year, while Trump threatened to impose $ 11 billion in tariffs.
Washington's response is expected in the days following the WTO's green light on retaliation. The United States has identified possible targets – with tariffs of up to 100% – on a merchandise list with a total export value of $ 25 billion a year. The most valuable products on the US list are exports of European aircraft and parts, but tariffs could also affect products made by Europe's best-known premium brands.
LVMH Moet Hennessy Louis Vuitton SE is particularly vulnerable to proposed US taxes, which target two of its main product lines – wines and spirits like Dom Perignon, Moet & Chandon and Hennessy – and leather goods with labels such as Donna Karan , Givenchy. , Kenzo and Louis Vuitton.
Expensive tastes
The US luxury goods market is one of the major destinations of European companies such as LVMH, where the United States accounted for almost a quarter of its total global sales last year. US buyers bought LVMH assets worth 11.2 billion euros in 2018, according to Bloomberg data.
LVMH CFO Jean-Jacques Guiony said the company was "sensitive to tariffs and trade barriers" during a conference call in July.
The new rates will increase costs that will no doubt be passed on to US consumers, said Luca Marotta, chief financial officer of Paris-based Rémy Cointreau SA, which produces Rémy Martin Cognac, Cointreau, Passoa and Mount Gay rums.
"If the rate increase was to occur, I repeat, we will raise prices at the same time," said Marotta during a conference call on July 17.
Trump's planned European tariffs are unique for his administration because, unlike China's trade war with China, the United States will apply rights explicitly authorized by the WTO, an organization against which it threatens to withdraw. he does not reform himself.
The dispute between Airbus, based in Toulouse, France, and Boeing (NYSE 🙂 Co., in Chicago, summarizes a criticism of Trump and others – that the WTO is a slow bureaucracy – because this is a case which takes about 15 years to solve.
European beverage producers are already dismayed by the uncertainty of Trump's repeated threats to impose new tariffs on wine, alcoholic beverages and other alcoholic beverages.
The Trump administration is currently investigating the possibility of penalizing French wine and other products in response to the French tax imposed on digital companies such as Amazon.com Inc. (NASDAQ :)., Facebook Inc (NASDAQ :)., And Alphabet (Google from NASDAQ 🙂 Inc.
"The degree of uncertainty has increased somewhat", said Pernod Ricard (The general manager of PA 🙂 SA, Alexandre Ricard, during a conference call on August 26th.
The Parisian company Pernod Ricard produces high-end wines, bitters, whiskeys, spirits, cognac, brandies and rum.
The impact of Trump's tariffs will also have an adverse effect on Scottish whiskey producers, who already fear the fallout from a potentially messy and potentially messy Brexit.
In 2018, the European Union exported $ 2.1 billion worth of Irish and Scottish whiskeys to the United States, according to data provided by the Geneva-based International Trade Center.
Many US exporters are opposed to tariffs proposed by the Trump government, which they believe could provoke a boomerang and jeopardize thousands of jobs in the United States.
Whiskey shot
US whiskey producers have already suffered collateral damage as a result of Trump's steel and aluminum tariffs – prompting the EU to retaliate with a 25% tariff on bourbon and whiskey US. In addition, the EU has threatened further sanctions for US $ 12 billion worth of exports of whiskey and other US exports resulting from a related WTO dispute over US subsidies to US Boeing Co .
"According to the level of tariffs imposed on European spirits and wine, we estimate that this could have a negative impact on American companies, resulting in a loss of jobs from 11,200 to 78,600 jobs in the United States", said Chris Swonger, President and CEO. of the Distilled Spirits Council.
By ending illegal subsidies to Airbus or reaching a settlement agreement, the EU can avoid new, long-standing air disarmament tariffs.
Although US Trade Representative Robert Lighthizer and EU Trade Commissioner Cecilia Malmstrom have welcomed the idea of negotiating a settlement, discussions to solve the problem have not started yet.
These negotiations could become more difficult after Malmstrom resigned on November 1 to Phil Hogan, a fearless Irish trade negotiator who has pledged to take a more virile approach to the European Union. trade relations.
In an interview with RTE radio on September 10, Hogan said, "We will do everything in our power to allow Mr. Trump to see the mistake he has made."
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